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Levitt Report - NHL.com

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independent review of the<strong>com</strong>bined financial results ofthe national hockey league2002-2003 seasonArthur <strong>Levitt</strong> Jr.February 5, 2004


Arthur <strong>Levitt</strong> jr.February 5, 2004Commissioner Bettman and theBoard of GovernorsNational Hockey League1251 Avenue of the AmericasNew York, New York 10020-1189Dear Commissioner Bettman and the Board of Governors:The Commissioner of the National Hockey League (“<strong>NHL</strong>” or the “League”) hasrequested that I perform, under the retention of the <strong>NHL</strong>’s legal counsel, Skadden, Arps,Slate, Meagher & Flom LLP and Proskauer Rose LLP, an independent review of the<strong>NHL</strong>’s <strong>com</strong>bined Unified <strong>Report</strong> of Operations (“URO”) for the 2002-2003 season. Thepurpose of the retention was to advise the Commissioner and the <strong>NHL</strong> Board ofGovernors whether, in all material respects, the <strong>com</strong>bined URO results for the 2002-2003season reflect a <strong>com</strong>prehensive and accurate statement of the financial results of theLeague for that season.Assignment:My assignment was to make findings and reach conclusions as to:A. Whether the instructions governing the report of financial information requested bythe League’s URO adequately and appropriately account for and captures the relevantrevenues and expenses associated with operating a professional hockey franchise inthe <strong>NHL</strong>.B. Whether, based on the use of such verification and other procedures as I deemedappropriate, the member clubs of the <strong>NHL</strong> have accurately reported the financialinformation requested by the League’s UROs.C. Whether the treatment of affiliated or related <strong>com</strong>pany in<strong>com</strong>e in the URO is: (a)reasonable for the purposes of measuring the relevant revenues and expensesassociated with operating a professional hockey franchise in the <strong>NHL</strong>; (b) similar tothe treatment of affiliated or related <strong>com</strong>pany in<strong>com</strong>e in the calculation of BasketballRelated In<strong>com</strong>e (“BRI”), as that term is defined in the NBA/NBPA collectivebargaining agreement; and (c) similar to the treatment of affiliated or related <strong>com</strong>panyin<strong>com</strong>e in the calculation of Defined Gross Revenue (“DGR”), as that term is definedin the NFL/NFLPA collective bargaining agreement.D. Whether the current relationship between League-wide player costs and League-widerevenues is consistent with reasonable and sound business practices in this industry.43 Owenoke ParkWestport, CT 06880


Conclusions:In accordance with my assignment and based upon the independent review of the booksand records of the League, its member clubs and their affiliates as more fully described inthe report below, it is my opinion that:A. The instructions governing the report of financial information by the teamsthrough the URO, adequately and appropriately account for and capture allrevenues and expenses associated with operating a professional hockey franchisein the <strong>NHL</strong>.B. Based upon the verification and other procedures as set forth below, it is myopinion that the teams of the <strong>NHL</strong> have, in all material respects, accuratelyreported the financial information requested by the League’s UROs. The<strong>com</strong>bined URO presents a <strong>com</strong>prehensive and accurate statement, in all materialrespects, of the <strong>com</strong>bined financial results of the entire League, its teams andaffiliated and related-parties with respect to all hockey and hockey-relatedbusinesses of the League and its member teams. For the 2002-2003 season, the<strong>NHL</strong> has reported <strong>com</strong>bined operating revenues of $1.996 billion and a <strong>com</strong>binedoperating loss of $273 million before accounting for interest and depreciationexpenses.C. The treatment of affiliated or related-party in<strong>com</strong>e in the <strong>com</strong>bined UROreasonably measures the relevant revenues and expenses associated withoperating a professional hockey franchise in the <strong>NHL</strong> in all material respects andis similar to the agreed-upon measures used in the NBA collective bargainingagreement in calculating the related-party revenues that it shares with the players.D. The current relationship between League-wide player costs and League-widerevenues is inconsistent with reasonable and sound business practices. Playercosts of $1.494 billion or 75% of revenues substantially exceed such relationshipsin both the NBA and the NFL as those relationships are set forth in theircollective bargaining agreements.Background:The League is <strong>com</strong>prised of 30 teams as listed in Appendix A (Clubs or Teams). TheBoard of Governors has authorized the League office to obtain financial and other relatedinformation from the Clubs in order to annually <strong>com</strong>pile a League-wide <strong>com</strong>bined UROfor each <strong>NHL</strong> season. The URO is designed to collect financial and certain statisticalinformation from the Clubs in accordance with a standardized set of instructions, theobjective of which is to: 1) reflect the financial performance of the League on a<strong>com</strong>prehensive and aggregate basis, 2) provide Clubs with information on Leagueaverages and statistics, 3) allow individual teams to rank their particular performancerelative to League-wide performance, and 4) provide the League with information toenable it to assess the financial performance of individual Clubs. These objectives areachieved by requiring the teams to submit financial information to the <strong>NHL</strong> using2


standard instructions and to include financial information on affiliated and related partiesusing <strong>com</strong>mon definitions so as to present a <strong>com</strong>bined URO for the <strong>NHL</strong> as a whole.The 30 Teams represent 30 different businesses with different histories and uniquebusiness arrangements. For example, the teams have different owners and ownershipstructures, different financing arrangements, different contract terms with themunicipalities and facilities in which they play, and different sponsorship and mediaarrangements. It should be noted that all teams play in venues used also for non-hockeyevents, including college basketball (e.g., Carolina Hurricanes and North Carolina StateWolfpack), professional basketball (e.g., Los Angeles Kings and the Los Angeles Lakersand Los Angeles Clippers), rodeos (e.g., Calgary Flames and the Calgary Stampede), andconcerts. The relative significance of hockey to non-hockey events varies widely fromarena to arena. In some instances, such as in Columbus, the facility is owned by anindependent unrelated third party. In other instances, a municipality may own thefacility, while in still other instances the team owner may own either a controlling interestor a minority interest in the facility. Because of the economic and businesscircumstances unique to each of the teams, the UROs and URO instructions are designedto include all hockey-related revenues and expenses of each team, regardless of how thatteam is legally structured, operates or the ownership of the facility it plays in. The goalsof the URO are to provide instructions to the teams so they report their business activitieson a <strong>com</strong>prehensive basis using standard instructions and enable the <strong>com</strong>pilation andpresentation of a full and accurate statement of the League’s <strong>com</strong>bined financial resultsbased upon a <strong>com</strong>prehensive picture of the entire business of hockey, including allrevenues and expenses related to operating an <strong>NHL</strong> franchise.<strong>NHL</strong>’s Financial <strong>Report</strong>ing: The Unified <strong>Report</strong> of Operations:Pursuant to League rules, each team is required to prepare a URO and submit it to the<strong>NHL</strong> League office. At the end of each season the League office issues updatedinstructions to the teams on how the URO is to be prepared, along with a reportingpackage in electronic format to be <strong>com</strong>pleted by each team. The 2002-03 URO<strong>Report</strong>ing Package and Instructions are included as Appendix B.A team’s URO is required to include all hockey related revenues and expenses, regardlessof whether they are recorded by an affiliated entity or by a related-party. This is toinclude all hockey related revenues such as gate receipts, broadcasting, media and arenarevenues, and all expenses such as player costs, team operating and development costs,arena and building costs, marketing and general and administrative costs. The URO hasdetailed supporting schedules for reporting revenues, player costs, team operating costs,team development costs, arena and building costs, general and administrative costs,advertising, marketing and public relations costs, balance sheet, cash flow fromoperations, debt, related-party/affiliated entity transactions, allocations, building statisticsand <strong>com</strong>pensation cost for players. Each team’s URO includes a share (1/30th adjustedfor currency) of the revenues and expenses generated through the League office, such asnational broadcasting, national licensing and League administration costs. Attached, asAppendices C, D and E are lists of the specific revenues and expenses required to bereported in the URO by each team.3


The revenues and expenses reported in a team URO may be different from the revenuesand expenses reported in the team’s audited financial statements. The audited financialstatements generally only include the revenues and expenses of the legal entities beingreported upon. For instance, a team’s audited financial statements would not includerevenues derived from game day concessions or dasherboards if those revenues werereported by a related-party. Therefore, the audited financial statements are not<strong>com</strong>prehensive enough to include hockey-related revenues and expenses reported byseparate affiliated entities or related parties or may include non-hockey revenues orexpenses. The teams are also required, as part of the URO reporting process, to provide areconciliation of the revenues and expenses reported in the “Club” columns of the UROwith those reported in the audited financial statements. The League office periodicallymakes supplemental information requests of the teams for data to support the URO andtest the team’s <strong>com</strong>pliance with URO instructions.Project Summary:Background and Purpose:Commissioner Bettman initially contacted and met with me in February of 2003. Duringthat meeting, we discussed the four questions enumerated earlier in the report that hewanted me to address. He was emphatic in his instructions that the review proceduresshould be designed in a manner I deemed appropriate, and that I would have access toany and all the data I needed to perform the assignment. Moreover, CommissionerBettman made it clear that my review of the League’s finances and my report thereonshould be independent, even if my findings were dramatically different from thosereported in the <strong>com</strong>bined URO. In order to undertake this <strong>com</strong>prehensive, <strong>com</strong>plex andtime-consuming assignment and to ensure we maintained the independence of our workand integrity of the results, I directed the <strong>NHL</strong> to retain the independent accounting firmof Eisner LLP (“Eisner”) to provide the resources necessary to perform the procedures.In addition, I directed the <strong>NHL</strong> to retain Lynn E. Turner, currently a Professor andDirector of the Center for Quality Financial <strong>Report</strong>ing at Colorado State University and aformer Chief Accountant of the Securities and Exchange Commission, to oversee theirwork. In order to answer the assigned questions, Turner, Eisner and I jointly designed aset of procedures so that, based upon our independent review, we could conclude ourassignment. Eisner, Turner and I are independent of the <strong>NHL</strong> and its teams and haveperformed no other services for them. The <strong>NHL</strong> had paid all of the fees due for myservices at the time of my retention, and no fees were contingent in any manner upon thefindings of this report.We <strong>com</strong>menced our work in April 2003 and <strong>com</strong>pleted it in February 2004. During that10-month period, over two thousand man-hours were incurred by Eisner, Mr. Turner andmyself. In addition, thousands of man-hours were spent by the League and teampersonnel collecting data, meeting with us, and answering our inquiries. Further,thousands of man-hours were spent by the teams’ independent auditors in theperformance of their audits and the special procedures requested as a part of the project.4


Phase I - Planning:Phase I of our work was a planning phase. In April the League provided us withsummary UROs for all of the teams for the three fiscal years ended June 30, 2002 inorder for us to choose two teams for in depth review and enable us to develop a projectplan. We chose two teams to visit and conducted <strong>com</strong>prehensive full-day interviews withtheir Chief Financial Officers with respect to team structure, finances and operations. Weinterviewed other management as required on select topics. The purpose of these reviewswas to gain a preliminary understanding of the URO process at the team level and themethodologies used for cost and revenue allocation. We further gained an appreciationof the unique circumstances each team faces with respect to its history, structure,business and market.Based on this work we prepared a plan for the <strong>com</strong>plete project and met with Leagueofficials to inform them of our approach. The plan included two additional phases:Phase II – a review of all 30 teams’ UROs for the 2001-2002 season in preparation for anin-depth review of the 2002-2003 URO; and Phase III – the in-depth review of the UROsfor the 2002-2003 season in order to conclude on our assignment. After informingLeague management of our approach, we began our work on Phase II.Phase II – Review of 2001-2002:The second phase of work was to review the 2001-2002 UROs and financial statementsfor the remaining 28 teams. The purpose of Phase II was to fully understand the UROreporting process at all the teams, assess its adequacy, make re<strong>com</strong>mendations formodification to it, if necessary, and assess the financial, accounting and allocation issuesfacing each team as it prepares its URO; all as a prelude to fulfilling our assignment as itrelates to the 2002-2003 URO results. As a part of that review, we developed a 7-pagerequest for supplemental information that the teams filled out and returned to the Leagueand us. After analyzing all of this information, we conducted 2-4 hour interviews witheach team and then followed up with requests for additional information and explanationsof variances as we felt necessary. We also reviewed the independent auditors’workpapers for two teams for the 2001-2002 season.As a result of our Phase II work, we requested modifications to the URO instructionswhich included clarification of accounting principles and additional details on affiliaterelationships and allocations. All our requested modifications were incorporated by theLeague in the instructions to the 2002-2003 URO. On September 22, 2003, the <strong>NHL</strong>provided each member team with a URO <strong>Report</strong>ing Package and Instructions for the2002-2003 season.5


Phase III – Review of 2002-2003:For the 2002-2003 season we requested that the <strong>NHL</strong> have each team obtain an audit ofits financial statements by an independent public accounting firm and have itsindependent auditor issue a supplementary audit report on the URO’s summary statementof operations (Schedule I) and the schedule of related-party transactions (Schedule XII). 1An example of the supplementary audit report requested by the <strong>NHL</strong> is contained inAppendix F. The form of this report is in accordance with generally accepted auditingstandards. We requested the report in order to ensure that the information in the UROwas subjected to the auditing procedures applied in the independent auditor’s audit of thefinancial statements and, in the opinion of the auditor, is fairly stated in all materialrespects in relation to the financial statements taken as a whole.For the 2002-2003 season, we visited three more teams selected by us. For all 30 teams,we again did detailed interviews with each team’s Chief Financial Officer and selectedmanagement as needed. The reviews en<strong>com</strong>passed analysis of fluctuations of reportedamounts and a review of the revenue and expense allocations for the teams with affiliatedbuildings and detailed inquiry of management. Additionally, for a select group of teamswith affiliated buildings, we had the teams’ independent auditors perform agreed-uponprocedures on the allocations and related-party transactions in the team’s URO. Further,we performed benchmarking tests (as described in detail later in this report) to determinethe overall reasonableness of the allocation of arena-related revenues and expensesbetween <strong>NHL</strong> hockey and non-hockey events and therefore includable or not includablein the URO. We also performed a separate benchmark test on local cable broadcastrevenues reported by teams that have an affiliated cable broadcaster. We performed otherverification procedures, analysis and tests of the information as we deemed appropriate inthe circumstances. Finally, we selected 4 teams and reviewed the workpapers of theirindependent auditors.Procedures:Under my direction, members of my team were assigned various tasks to execute in orderto ac<strong>com</strong>plish our assignment.The procedures performed are described below by the three phases:1 Due to the bankruptcy filings of the Buffalo Sabres and Ottawa Senators in January 2003, and the uniquefinancial and legal circumstances surrounding such filings, the teams were unable to provide audit reports.In addition, two other teams did not have audit reports issued because of pending financing issues andtransactions. In these cases, alternative verification procedures were performed as described later in thisreport.6


5. We inspected the audit workpapers of the independent auditors for the League forthe 2001-2002 season, which addressed in detail the testing of revenues andexpenses and allowed us to understand the audit procedures they performed. Wealso read the fiscal 2002 audited financial statements of other League-affiliatedentities, including several pension plans, a captive insurance <strong>com</strong>pany for theLeague and its teams, League charities and the team’s Collective Bargaining Fundescrow accounts.6. We requested and reviewed supplementary information in a format specified byus for the 2001-2002 season from all 30 teams. This included additionalinformation regarding revenues and expenses that were subject to allocationbetween hockey and non-hockey events by the teams and any affiliated entitiesand a description of the methods of allocation. The supplemental informationalso included operating statistics for the number of events, attendance and gatereceipts for events held in the team’s arena and a request for a reconciliationbetween the revenue and operating profit/loss reported in the audited financialstatements and the amounts reported in the URO, as well as detailed explanationsof any non-operating expenses or revenues reported in the URO.Phase II – 2001-2002 Detailed Work:7. Subsequent to the <strong>com</strong>pletion of steps 1-6 above, which were essential forplanning of the larger engagement, we read the 2001-2002 UROs, financialstatements, supplementary information responses and three-year <strong>com</strong>parativeUROs <strong>com</strong>piled by the League for 27 of the remaining 28 teams. Due tobankruptcy-related issues, Buffalo submitted an estimated URO which we did notreview. We interviewed by telephone the financial management of each of the 27teams to discuss the basis of preparation of the URO and how revenues andexpenses were allocated between hockey and non-hockey activities by the teamsand any affiliated entities. Inquiries were made to gain an understanding of: (i)the ownership and financial structure of the team, (ii) the nature of each revenuestream that might be associated with hockey and therefore reportable in the URO,(iii) any transactions between the team and any affiliated or related parties, (iv)how revenue and cost allocations were made between the team and any affiliatedor related parties, and (v) the accounting principles followed in the preparation ofthe URO. We also discussed with each team variances noted based on a<strong>com</strong>parison of the 2001-2002 UROs to the prior two fiscal years’ UROs. Eisnermade additional inquiries of the teams about any other matters that came to theirattention during the review of the teams’ URO and financial statements, and theteams responded to these inquiries.Three of the teams did not have individual team financial statements for the 2001-2002 season, three of the teams did not prepare supplementary informationresponses and, as noted above, one team did not prepare a final URO for the2001-2002 season due to bankruptcy-related issues. However, these did notimpact our ability to review and discuss the UROs prepared for the 2002-2003season.8


8. We tested the mathematical accuracy of the <strong>com</strong>bined URO for the 2001-2002season. We randomly selected five teams and the individual team’s URO datawas checked against the related amounts included in the <strong>com</strong>bining spreadsheets.No exceptions were noted as a result of these procedures.Phase III – 2002-2003:9. Based on the results of the procedures noted in Phases I and II above, the <strong>NHL</strong>financial staff, at our request, clarified and modified the 2002-2003 UROinstructions prior to their issuance to the teams in September, 2003. Clarificationswe requested included: (i) a change in the instructions clearly confirming alldepreciation expense be reported as non-operating expenses (not included in the$273 million of net operating loss), (ii) a change in the reporting of certaingovernment grants to be more inclusive, (iii) clarification of the instructions toavoid certain reporting oversights made by some teams in the 2001-2002 season,(iv) clarification of the accounting for deferred signing bonuses and (v) theaddition of new schedules setting forth in detail: (a) any allocations of revenueand expenses between hockey and non-hockey activities, by the teams and anyaffiliated entities together with supporting information, and (b) number of events,paid attendance and gross receipts statistics for the team’s arena. At our request,the <strong>NHL</strong> financial staff also issued specific instructions to particular teams tochange the way certain revenue or expense items were being reported in the UROin order that they be in <strong>com</strong>pliance with the revised instructions. In all cases, themodifications are reflected in the <strong>com</strong>bined URO results. 210. We obtained and read the <strong>NHL</strong> URO <strong>Report</strong>ing Package and Instructions andaudited financial statements for three teams we selected for the 2002-2003 season.We visited each of those three teams and discussed the preparation of the UROfor the 2002-2003 season with the financial management of those teams.Interviews were conducted with the financial management of the teams andinquiries were made concerning any changes in: (i) the business and financialoperations, and the ownership structure of the teams, (ii) the nature of eachrevenue stream reportable in the URO, (iii) any transactions between the teamsand any affiliated or related parties, (iv) how revenue and cost allocations weremade between the teams and any affiliated entities, and (v) the accountingprinciples followed in the preparation of the URO. Detailed supporting schedulesfor allocations of revenues and expenses between hockey and non-hockey eventsby the teams and any affiliated entities were provided by each team and discussedduring the visits. Financial management of each team responded to our questionsregarding the URO preparation, the operations of the team and variances based onan analytical review of the 2002-2003 UROs <strong>com</strong>pared with the prior two fiscalyears UROs.2 Our review of the 2001-2002 <strong>com</strong>bined URO statements was not made for determining whetherthe UROs for years prior to 2002-2003 were materially accurate. The 2001-2002 unaudited<strong>com</strong>bined URO as initially reported by the <strong>NHL</strong> and teams, and not subject to our review,reported an operating loss of $218 million.9


11. We selected eight teams and requested that each team’s independent auditorperform additional agreed-upon procedures specified by us with respect to theteam’s allocation of revenues and expenses between hockey and non-hockeyactivities in the 2002-2003 URO. Those procedures were requested to providegreater assurance as to the accuracy of data and analysis contained in SchedulesXIII (Allocations) and XIV (Building/Arena Statistics) of the teams’ UROs. Theindependent auditors were requested to issue a separate agreed-upon proceduresreport covering the financial information and statistical data included on theseschedules of the URO for the 2002-2003 season. A sample of such a report isincluded in Appendix G. We applied these procedures to teams where themethodology for the allocation of revenues and expenses was particularly<strong>com</strong>plex. We obtained and read the agreed-upon procedures reports of theindependent auditors.12. We obtained and read the UROs, team audited financial statements andsupplementary audit reports on URO Schedules I and XII for the 2002-2003season for all 30 teams, except as noted below. Telephone interviews wereconducted with financial management of the 27 teams that we did not visit.Management of each team responded to our questions regarding the UROpreparation, allocations of revenues and expenses between hockey and nonhockeyevents by the teams and any affiliated entities, and variances based on a<strong>com</strong>parison of the 2002-2003 season UROs with the two prior fiscal years’UROs. After the interviews, follow-up questions were sent to any team of whichwe had questions and the responses were received and analyzed.Four of the teams did not have audited financial statements for the 2002-2003season or supplementary audit reports on Schedules I and XII. For each of theseteams, Eisner personnel or the team’s independent auditor visited the team andperformed on site the list of procedures specified by me and set forth at AppendixH. (In addition to Ottawa and Buffalo (see footnote 1), two other teams did nothave their audit reports issued because of pending financing issues andtransactions.) Of the 26 team audited financial statements received, 23 wereunqualified and three had “going concern opinions”.13. For the 22 teams with affiliated arenas, we obtained and read the audited financialstatements of the affiliated entities, except as noted below. The purpose was todetermine that 1) all hockey-related revenues and expenses were included in theURO, and 2) all significant related-party transactions were properly disclosed andreflected in our analysis.We were not provided with the audited financial statements for the arenas of 6 ofthe 22 teams that have affiliated arena entities. In three cases, the arenas’independent auditors performed agreed-upon procedures specified by me on theinternal financial statements of the arena. In one case, the arena’s independentauditor performed agreed-upon procedures on the excerpted information providedto us by <strong>com</strong>paring it to amounts reported in the audited financial statements ofthe arena. We obtained and read the agreed-upon procedures reports of theindependent auditors in each of these cases. In the other two cases, Ottawa and10


.Buffalo, the agreed-upon procedures performed by Eisner related to the arena aswell as the team.14. We inspected the audit workpapers of the independent auditors for four teams weselected for the 2002-2003 season. This included the audit workpapers to supportthe independent auditors’ supplementary audit report on the URO Schedule I(Summary Statement of Operations) and Schedule XII (Related-Party/AffiliatedEntity Transactions). The audit workpapers addressed in detail the testing ofrevenues and expenses and we inspected those papers to understand theprocedures that had been performed. These teams were selected by Eisner torepresent a diverse sample of locations and auditors and to avoid overlap withteams that were visited for interviews or where additional agreed-upon procedureswere being performed by the team’s auditors. However, included in this selectionwas one team where the auditors performed agreed-upon procedures on UROSchedules XIII and XIV as noted in item 11.15. We obtained and read the audited financial statements of the <strong>NHL</strong> and <strong>NHL</strong>affiliatedentities for the 2002-2003 season and <strong>com</strong>pared the financialinformation to the prior year’s financial information. We reconciled the totalLeague office-generated revenue and expenses to the amounts included by theteams in the <strong>com</strong>bined URO.16. We obtained and read the <strong>com</strong>bined League-wide URO for the <strong>NHL</strong> included asAppendix I. The mathematical accuracy of the <strong>com</strong>bined URO for the 2002-2003season was tested and we checked the data included in each team’s URO to theamounts included in the <strong>com</strong>bined URO. We inquired of the <strong>NHL</strong> CFO as towhether there had been any changes made in: (i) the process the <strong>NHL</strong> used toreview individual team results throughout the season and at fiscal year-end andprepare the <strong>com</strong>bined URO and (ii) revenues and expenses generated by theLeague office. No exceptions were noted as a result of these procedures.During the course of our review, modifications were made to the teams’ treatmentof certain revenues and expenses. These modifications are included in the $273million operating loss reported in the <strong>com</strong>bined URO.17. Affiliate Benchmarking:As part of our engagement, we wanted to test whether the <strong>NHL</strong> teams had made areasonable allocation of fixed revenues and expenses between hockey and nonhockeyevents. Since various teams with different business arrangements hadused different methods, we also wanted to test if standardizing the differentallocation methods used by the teams would have a material effect on the overallamounts included in the <strong>com</strong>bined League-wide URO. In order to do so, wedeveloped and applied a benchmarking test using a standard basis of allocation,paid attendance at hockey versus non-hockey events, and tested the amountsincluded in the <strong>com</strong>bined URO for reasonableness.Below is a detailed description of the background and the test.11


Background:Twenty-two of the 30 <strong>NHL</strong> teams play in an arena that is 50% or more owned,operated or controlled by the team or an affiliated or related-party. Some of these22 teams share the arena with an NBA basketball team and all of the arenas inwhich these teams play host other non-hockey events such as college basketballand concerts. As a result, these arenas and teams often generate revenues andincur expenses that relate to both hockey and non-hockey activities. In theseinstances and for URO purposes, teams must determine the amount of revenuesand expenses that are associated with operating a professional hockey franchise inthe <strong>NHL</strong> and those amounts of revenues and expenses that are derived from nonhockeyactivities.Because of the individualized nature of the relationships between each team andits affiliated or related parties, and because each team faces differentcircumstances and market conditions, the URO does not mandate a uniformmethodology of allocating revenues and expenses received by affiliated or relatedparties between hockey and non-hockey activities. The instructions in the 2002-03 URO provide that:“Activities relating to <strong>NHL</strong> hockey which are carried on through a parent<strong>com</strong>pany, a subsidiary <strong>com</strong>pany, a sister <strong>com</strong>pany or through any otherentity which shares <strong>com</strong>mon or family operating control with the Teamare considered “Affiliated” and <strong>NHL</strong> hockey’s share of those operationsmust be reflected herein. . . . The method of revenue/cost allocationbetween hockey and non-hockey may vary from one Club to anotherdepending on the significance of the events held in your building. In allcases, when revenues/costs are being allocated, the Club should follow thefollowing general principles:(a)(b)(c)The basis of allocation should be based on management’s bestestimate of the economic reality of the transaction(s) andreflect a reasonable approach to allocation.The basis of allocation should be consistent to the basis used toreport prior years unless the analysis in (a) requires change.Where appropriate, the basis should be consistent to internaland external reporting.”The URO instructions also provide that, to the extent any team revenues orexpenses were based on allocations between hockey and non-hockey activities,the team must provide detailed supporting schedules explaining the calculationsand the principles underlying the allocations.In our review of the financial information provided by the 22 teams that play in anarena that is 50% or more owned or operated or controlled by the team, or anaffiliated or related-party, we observed a wide diversity of practices in how theseteams allocate certain arena revenues and expenses, such as those related to fees12


from the licensing of suites and club seats, sponsorship arrangements when soldon a <strong>com</strong>bined basis for all events held in the arena, fixed signage visible at allevents held in the arena, arena naming rights, and fixed building costs (i.e.: otherthen direct event night costs). I understand the differing practices have developedover time to fulfill each individual team’s business needs and include allocationsbased on: i) the relationship between the number of hockey events and the numberof total events in the building, ii) the relationship of hockey attendance to totalattendance in the building; and iii) affiliate contractual relationships or historicalexperience.For example, in one instance, a team plays in an arena which is owned, managedand controlled by an affiliate and because the majority of the arena’s business isrelated to the operation of the hockey franchise, the team’s URO includes adisproportionately high share of suite and fixed signage revenues (when <strong>com</strong>paredto an allocation done using paid attendance) and a disproportionately low share offixed building costs. Conversely, in another instance, because the arena is ownedby an unaffiliated third party, the team does not own or receive certain categoriesof revenues such as building naming rights and certain suite premiums. Theserevenues are retained by an unaffiliated third-party and, therefore, are properlyexcluded from the team’s URO.Given the different economic circumstances each team faces, and the individualnature of the relationships between teams and affiliated or related parties, it is notsurprising that individual team allocation methods vary, as those methodologieswere designed by each team to account for its business activities based on itsunique circumstances. However, as I am reporting on the <strong>com</strong>bined URO for the<strong>NHL</strong>, such individual differences are not relevant for purposes of our assignment.What is relevant is whether, on a League-wide aggregate basis, the allocation ofrevenues and expenses would change significantly if they were reallocated using astandard methodology. We therefore performed a benchmarking study using areasonable and uniform methodology to determine: (i) whether, on a League-wideaggregate basis, arena revenues and expenses allocated by all of the 22 teamsaccording to a consistent standard would be materially different from the total ofthe amounts included by the teams in the League’s <strong>com</strong>bined URO and (ii)whether any such difference would have a material effect on the overall operatingloss of the League. The significance of the benchmarking study is to test, on anoverall basis, the reasonableness of the allocations of revenues and expensesbetween hockey and non-hockey activities when affiliated arena relationshipsexist.To perform the benchmarking study, we focused on the 22 teams that play inarenas that are 50% or more owned, operated or controlled by the team, or anaffiliated or related-party, and the allocation of arena revenues and expensesbetween hockey and non-hockey activities. It was not necessary to include theother eight teams in the benchmarking study as the arenas in which they operateare not affiliated, are leased to the teams on an arm’s length basis for only hockeyactivities and therefore no arena-related allocations are required. For purposes ofthis study, we considered suites and club seats, fixed signage, arena sponsorship13


Procedures:We requested that the <strong>NHL</strong> perform a calculation to determine what the allocatedrevenues and expenses included in the 2002-2003 <strong>NHL</strong> <strong>com</strong>bined URO would beif each of the teams with a building affiliation had allocated revenues andexpenses using a consistent methodology based on paid attendance at <strong>NHL</strong>hockey events in relation to total Paid Attendance in the arena. We reviewed thecalculations in detail and <strong>com</strong>pared the results to the amounts included by eachteam in the UROs submitted.Conclusion – Affiliated Arenas:Based on this benchmarking analysis, I conclude that, when allocated betweenhockey and non-hockey events using Paid Attendance as a standard basis ofallocation, aggregate League-wide revenues and expenses would not materiallydiffer from the amounts reported in the <strong>com</strong>bined League-wide URO. The<strong>com</strong>bined URO reports an aggregate League-wide operating loss of $273 millionfor the 2002-2003 <strong>NHL</strong> season. The results of the benchmarking study wouldincrease the <strong>NHL</strong>’s operating loss for that same season by $2 million.Under either measure, it is clear the <strong>NHL</strong> is suffering considerable losses. In fact,the <strong>NHL</strong>’s losses are even more extensive than those identified in the URO, or thebenchmarking studies, because operating losses do not account for depreciationand interest charges for both the arenas and the teams. If just interest expenses asreported by the teams in the UROs as non-operating expenses were taken intoconsideration, the <strong>NHL</strong>’s aggregate loss would increase by approximately $101million to $374 million.We considered whether hockey revenues should include a portion of revenuesearned by unrelated businesses which share <strong>com</strong>mon ownership with the team. Itwould be inappropriate and not in accordance with Generally AcceptedAccounting Principles or the accounting rules and regulations of the Securitiesand Exchange Commission for the hockey team to increase its revenues byattributing a portion of the revenues earned by an unrelated business under<strong>com</strong>mon ownership that were not measurably attributable to hockey. We do notbelieve that any such revenue attribution could or should be made.Benchmarking - Broadcasting:As part of our work, we wanted to test the reasonableness of the local cablebroadcasting revenues included in the URO when the team had a broadcast rightsagreement with an affiliated entity or related-party, so we <strong>com</strong>pared the localbroadcasting revenue reported in the URO by those teams to the ComputedRevenue described below.For the four teams that have broadcast agreements with an affiliated or relatedparty,the <strong>NHL</strong> <strong>com</strong>puted a fair market value for the broadcasting revenue using a16


formula which takes into account: <strong>com</strong>parable agreements negotiated at arm’slengthbetween unrelated parties in the top ten Nielsen Media ResearchDesignated Market Areas (“DMAs”) in the U.S. where there are <strong>NHL</strong> teams plusa large Canadian market; the nature of the relationship between the team and thebroadcaster; the rights covered by the agreement; the number of games broadcastand the ratings. This analysis provided average revenue per viewer based onbroadcasting agreements negotiated in the top ten markets where the <strong>NHL</strong> hasteams (Computed Revenue). This Computed Revenue per viewer was thenapplied to the viewers in each of the markets where teams had an affiliatedbroadcaster to establish a fair market value for their rights based on the averagerevenue achieved in unaffiliated markets. We obtained and read the analysisprepared by the <strong>NHL</strong>. The analysis <strong>com</strong>pared the Computed Revenue to the UROrevenue. In all cases, the amounts included in the URO by the teams exceededthe fair market value <strong>com</strong>puted. If an adjustment were made to the <strong>com</strong>binedURO, the <strong>com</strong>bined operating loss for the <strong>NHL</strong> for 2002-2003 would beincreased.Other procedures:18. For the 2002-2003 season, we obtained and read 70 player contracts, representingthe two highest-paid players on each team plus ten additional contracts. Thefinancial terms in the contracts were <strong>com</strong>pared to the disclosures in the player<strong>com</strong>pensation table in each team’s URO. With respect to signing bonuses anddeferred <strong>com</strong>pensation provided in a player contract, we <strong>com</strong>pared the financialterms to the treatment in the team’s URO. We also analyzed any non-standardprovisions in these contracts to ascertain whether the accounting for thesecontracts was in accordance with the URO instructions. On an overall basis, webenchmarked the present value of deferred signing bonuses against the costs theteams included in their UROs to ensure that an appropriate amount was includedin the <strong>com</strong>bined URO. The resulting difference, which was not material to the<strong>com</strong>bined URO, was included in the overall benchmarking results set forth initem 17 above.19. For the 2002-2003 season we selected, obtained and read related-party arena leaseagreements for four of the 22 teams that have affiliated arena entities, and<strong>com</strong>pared our findings to the disclosures contained in the audited financialstatements of the team and the treatment in the team’s URO. We noted that theinformation obtained in our reading of the related-party agreements wasconsistent with the information disclosed in the audited financial statements andthe UROs.20. We inquired of each team as to the nature and amount of any <strong>com</strong>pensation to theteam owners or their affiliates. We read Schedule XII (Related-Party/AffiliatedEntity Transactions) of each team’s URO to determine whether any other suchamounts were reported by the teams. The 26 teams with audited financialstatements also had supplementary audit reports in accordance with GenerallyAccepted Auditing Standards covering Schedule XII, which discloses inaccordance with Generally Accepted Accounting Principles all related-party17


transactions in excess of $25,000. We <strong>com</strong>pared the salaries paid by each team toits owners, if any, to 2002-2003 <strong>com</strong>pensation data furnished by the League andfound that the owners’ <strong>com</strong>pensation reported in the UROs was consistent withamounts paid to non-owners performing similar functions.21. We read the relevant sections of the collective bargaining agreements for both theNational Basketball Association (“NBA”) and the National Football League(“NFL”) related to the determination of revenues that are shared under theirrespective collective bargaining agreements.Under the NBA collective bargaining agreement, the share of revenues that ispaid to the players is based on BRI, which is defined as the aggregate operatingrevenues “derived from, relating to or arising directly or indirectly out of theperformance of players in NBA basketball games or in NBA-related activities.”BRI en<strong>com</strong>passes revenues earned by NBA teams, including those derived fromregular season and playoff gate receipts; broadcast rights; exhibition games;novelty, program and concession sales; parking; team sponsorships; arena clubs;luxury suites; fixed and temporary signage and revenues from NBA Properties,NBA Entertainment, and other NBA affiliates. The NBA accounts for affiliatedor related-party in<strong>com</strong>e by counting these revenues in BRI whether they arereceived by a team or a “Related-Party.” The term “Related Parties” is defined as“third parties that control, or own at least 50% of the NBA team or that arecontrolled or owned at least 50% by the persons or entities controlling or owningat least 50% of the NBA Team.” The <strong>NHL</strong> defines an affiliated, or related-party,as any entity which is owned or controlled by the <strong>NHL</strong> franchise, or shares<strong>com</strong>mon or family operating control with the <strong>NHL</strong> franchise.Since many NBA teams share an arena and often <strong>com</strong>mon ownership with an<strong>NHL</strong> team, the NBA faces many of the same affiliated or related-party accountingissues as the <strong>NHL</strong>. Similar to the <strong>NHL</strong>, a majority of NBA teams play in an arenawhere a Related-Party owns or operates it for all events held in that arena.Accordingly, revenues received by a Related-Party may need to be allocatedbetween NBA basketball games and events unrelated to NBA basketball, such as<strong>NHL</strong> hockey games, college basketball games, concerts and other events. Inmany instances, as a matter of negotiated agreement between the NBA and theNational Basketball Players Association (“NBPA”), the NBA collectivebargaining agreement gives specific revenue allocation guidance to determine theproportion of revenues to be included in BRI. For example, 40 percent ofRelated-Party arena revenues derived from fixed arena signage and luxury suitesare allocated to BRI without regard to the actual proportion of revenues receivedby the arena that are attributable to the playing of NBA basketball games. Andfor other arena revenues received by Related Parties, such as those derived fromin-arena sales of concessions, parking, arena clubs, and temporary signage, theNBA collective bargaining agreement provides that actual game-day proceeds areincluded in BRI. Building naming rights are excluded from BRI.18


However, with respect to broadcasting agreements between NBA teams andRelated-party broadcasters, the NBA collective bargaining agreement providesonly general guidance to allocate these revenues based on fair market valuebetween basketball and non-basketball in<strong>com</strong>e.We understand that each year during the audit process, the NBA and NBPAnegotiate over what amount of certain revenues received by Related Partiesshould be included in BRI. In most instances, representatives of the NBA and theNBPA have negotiated resolutions to these various disputes. The NBA collectivebargaining agreement itself contains examples of the parties’ negotiation andresolution of these types of issues. For example, the parties agreed that, becausethe value of the local broadcast agreement between the New York Knicks andMSG Network could not be readily ascertained, the Knicks would include in BRIan amount equal to the value of the Los Angeles Lakers’ local broadcastagreement. Similarly, because the value of the Knicks’ transactions with RelatedParties involving arena signage could not be readily ascertained, the partiesagreed that the Knicks would include a designated amount in BRI for signage andthat this amount would be increased or decreased each year based on League-widechanges in signage revenue. Thus, in some instances, the manner in which theNBA accounts for affiliated or related-party in<strong>com</strong>e does not reflect an attempt toallocate in<strong>com</strong>e between basketball and non-basketball activities based on any setstandard, but rather is the result of an agreement reached through negotiationsbetween the NBA and the NBPA. In this and other respects, the <strong>NHL</strong> UROinstructions and our benchmark studies require inclusion of affiliated or relatedpartyrevenue amounts based on mathematical calculations rather than inaccordance with a negotiated agreement as is the case of the NBA and the NBPA.With respect to the NFL, it is difficult to make a meaningful <strong>com</strong>parison betweenthe URO treatment of related-party in<strong>com</strong>e and the treatment of related-partyin<strong>com</strong>e in the calculation of DGR under the NFL's collective bargainingagreement. The NFL infrequently confronts affiliated or related-party accountingissues because few NFL team owners own the stadium in which their team plays.Of those few team owners who also own the stadium in which their team plays,most received significant government funding for construction of the stadium,funded construction through premium seat revenues, or borrowed funds from theNFL, all of which by agreement with the NFL Players’ Association are excludedfrom DGR under the collective bargaining agreement to the extent they are usedfor stadium construction. Accordingly, issues associated with related-partytransactions and how to allocate these revenues between football and non-footballactivities infrequently arise and therefore we did not <strong>com</strong>pare the URO reportingof Related-Party in<strong>com</strong>e to DGR.Nevertheless, we took the data <strong>com</strong>piled during the benchmarking process andapplied our interpretation of the NBA’s BRI standards as set forth in theCollective Bargaining Agreement for treatment of suite, fixed signage and namingrights revenue, whether received by affiliated or related parties or the teams, tothe <strong>NHL</strong> data in order to estimate what these <strong>NHL</strong> revenues would be by applyingthe BRI standards. We found the <strong>NHL</strong>’s treatment of these revenues in the19


<strong>com</strong>bined URO to be similar and the amounts reported in the <strong>com</strong>bined URO notmaterially different from the results of our calculation.22. Mr. Turner and I reviewed throughout the engagement the work and findings ofEisner. I received a report from Eisner setting forth the procedures theyperformed as outlined above and their findings. We also performed a review oftheir workpapers upon the <strong>com</strong>pletion of their engagement.Conclusions:Based upon the work performed over the last 10-months as outlined above, the extensivereview of the URO process, the teams’ audited financial statements, the supplementaryaudit reports on the selected URO schedules received from the independent auditors ofthe teams, the agreed-upon procedures reports on selected information from theindependent auditors of a sample of the teams <strong>com</strong>bined with the field visits andinterviews we engaged in, and the extensive benchmarking analysis performed onaffiliated arena and broadcasting relationships, I conclude the following with respect to:A. Whether the instructions governing the report of financial information requested bythe League’s URO adequately and appropriately account for and captures therelevant revenues and expenses associated with operating a professional hockeyfranchise in the <strong>NHL</strong>.The instructions governing the reporting of the financial information by the teamsthrough the URO, adequately and effectively direct the team to report all revenuesand expenses associated with operating a professional hockey franchise in the<strong>NHL</strong>.B. Whether, based on the use of such verification and other procedures as I deemedappropriate, the member clubs of the <strong>NHL</strong> have accurately reported the financialinformation requested by the League’s UROs.Based on our verification and the other procedures we performed and the auditopinions, supplementary reports and agreed-upon procedures of the teams’independent auditors, all as enumerated previously, it is my opinion that the teamsof the <strong>NHL</strong> have, in all material respects, accurately reported the financialinformation requested by the League’s UROs. The <strong>com</strong>bined URO presents a<strong>com</strong>prehensive and accurate statement, in all material respects, of the <strong>com</strong>binedfinancial results of the entire League, its teams, and affiliated and related-partieswith respect to all hockey and hockey-related businesses of the League and itsmember teams.The <strong>com</strong>bined League-wide URO as reported below includes all revenues 4 relatedto hockey, such as Gate Receipts, Suites and Club Seats, Concessions andBroadcasting, regardless of whether recorded on the team’s books or an affiliate’s4 Such revenues are fully detailed in the URO reporting package (Appendix B) and outlined inAppendix C20


ooks. Similarly, the <strong>com</strong>bined URO results include all expenses 5 related tohockey activities such as player costs, development costs, game day costs, fixedbuilding costs (excluding depreciation and interest) and applicable General andAdministrative Costs (G&A) regardless of whether recorded on the team’s booksor an affiliate’s books.The <strong>com</strong>bined League-wide URO for the fiscal year ended June 30, 2003 reports thefollowing amounts (in millions of U.S. dollars):2003 % of RevenueCombined Revenues $1,996 100Player Costs 1,494 75Other Operating Costs 775 39Total Operating Costs 2,269 114Operating Loss, excludingdepreciation, amortization,interest and taxes 1 ($273)(1) Incorporated in the above <strong>com</strong>bined results for the League are the costs of running the League office,the operating profit of <strong>NHL</strong> Enterprises and the net profit from the national broadcasting agreements.These are audited annually at the League level and each team includes in their URO their share ofthese revenues and costs as calculated in accordance with the League’s constitution and by-laws(1/30th adjusted for currency).Separate line items are provided in each team URO for League office costs, under “Dues andAssessments”; for net profit from <strong>NHL</strong> Enterprises, included in Other Revenues as “<strong>NHL</strong> EnterprisesRights”; and for net profit from the national broadcasting contracts included as “<strong>NHL</strong> TV Revenues –Net”.In the 2002-2003 season, 19 teams reported operating losses and 11 teams reportedoperating profits. The largest profit reported in its URO by a team was $14.6 million andthe largest loss was $40.9 million. The average profit of the 11 teams reporting a profiton the URO was $6.4 million. The average loss of the 19 teams reporting losses was$18.0 million. The average loss reported on the <strong>com</strong>bined League-wide URO for the 30teams was $9.1 million.5 Such expenses are more fully detailed in the URO reporting package (Appendix B) and outlined inAppendix D & E.21


Below the number of teams are segmented by size of operating loss/profit. In reviewingthe underlying data, there appears to be no clear relationship between the size of the lossand revenue ranking or market size as measured by a relative DMA ranking. All amountsreported below include operating profits earned in playoffs.Number ofTeamsAverage(Loss)/ProfitHighest(Loss)/ProfitCombined(Loss)/ProfitTeams <strong>Report</strong>ingOperating Losses:Over $30 Million 4 ($35.5) ($40.9) ($142.0)$20-$29.9 Million 2 (23.2) (26.2) (46.4)$10-$19.9 Million 6 (16.9) (19.0) (101.5)$5-$9.9 Million 6 (8.2) (9.9) (49.4)Under $5 Million 1 (3.1) (3.1) (3.1)Totals for Teams<strong>Report</strong>ing OperatingLosses 19 (18.0) (40.9) (342.4)Teams <strong>Report</strong>Operating ProfitsOver $10 Million 2 $12.7 $14.6 $25.3$5.0-$9.9 Million 4 8.1 9.4 32.4Under $5 Million 5 2.4 4.3 12.1Total for Teams<strong>Report</strong>ing OperatingProfits11 6.4 14.6 69.8Overall CombinedOperating Loss ($272.6)It is my opinion, based on all our work, that the <strong>com</strong>bined URO operating loss forthe fiscal year-ended June 30, 2003 of $273 million is a <strong>com</strong>prehensive andaccurate statement, in all material respects, of the results of operating the 30 <strong>NHL</strong>hockey franchises during the 2002-2003 season and includes all revenue andexpenses attributable to the hockey business whether recorded by the team or inan affiliated or related entity.However, it should be noted that the $273 million in operating loss is understatedas it excludes two important cost <strong>com</strong>ponents required to be considered undergenerally accepted accounting principles in measuring the results of operations.The $273 million <strong>com</strong>bined operating loss excludes any interest charges or debtservice for monies borrowed to directly support the operations such as workingcapital loans or borrowings to fund deficits, nor does it include any costs offinancing to purchase the teams, construct arenas or purchase any other tangibleassets, all of which need to be funded by team operations or the owner, when the22


team operations are insufficient. Further, the <strong>com</strong>bined loss of $273 millionexcludes any provisions for the replacement of depleting assets throughdepreciation or amortization.Including only net interest expense as reported in the UROs as non-operatingexpense (which may exclude interest expense for buildings, team purchases orborrowings to fund operations recorded by affiliates that might be properlyallocated to a team) would increase the operating loss to approximately ($374million).C. Whether the treatment of affiliated or related <strong>com</strong>pany in<strong>com</strong>e in the URO is: (a)reasonable for the purposes of measuring the relevant revenues and expensesassociated with operating a professional hockey franchise in the <strong>NHL</strong>; (b) similar tothe treatment of affiliated or related <strong>com</strong>pany in<strong>com</strong>e in the calculation of BasketballRelated In<strong>com</strong>e (“BRI”), as that term is defined in the NBA/NBPA collectivebargaining agreement; and (c) similar to the treatment of affiliated or related<strong>com</strong>pany in<strong>com</strong>e in the calculation of Defined Gross Revenue (“DGR”), as that termis defined in the NFL/NFLPA collective bargaining agreement.In my opinion, the treatment of affiliated or related-party in<strong>com</strong>e in the <strong>com</strong>binedURO reasonably measures the relevant revenues and expenses associated withoperating a professional hockey franchise in the <strong>NHL</strong> in all material respects andis similar to the agreed-upon measures used in the NBA collective bargainingagreement in calculating the related-party revenues that it shares with the players.The URO captures all revenues and expenses derived directly or indirectly fromactivities related to <strong>NHL</strong> hockey regardless of the legal entities through whichthose activities are conducted. Specifically, the URO includes revenues receivedby affiliated and related-party entities that are properly allocable to the operationof a hockey franchise.D. Whether the current relationship between League-wide player costs and League-widerevenues is consistent with reasonable and sound business practices in thisLeague.Based on our work, our understanding of the business of the sport of hockey, andour knowledge of the financial relationships that generally need to exist in orderfor a business enterprise to be financially sound and successful, the currentrelationship between League-wide player costs and League-wide revenues isinconsistent with reasonable and sound business practices. Player costs of $1.494billion or 75% of revenues substantially exceed such relationships in both theNBA and the NFL as those relationships are set forth in their collectivebargaining agreements.Respectfully Yours,(Original signed byArthur <strong>Levitt</strong> Jr.)23


AppendicesA – List of teamsB – Copy of 2002-03 URO <strong>Report</strong>ing PackageC – Major Hockey-related RevenuesD – Major League Player CostsE – Other CostsF – Form of supplementary audit reportG – Form of agreed-upon procedures reports – affiliated arenasH – Form of agreed-upon procedures reports – teams not auditedI. – Combined URO for 2002-2003 seasonJ – Arthur <strong>Levitt</strong>’s curriculum vitaeK – Lynn Turner’s curriculum vitae24


Appendix ATEAMMighty Ducks of AnaheimAtlanta ThrashersBoston BruinsBuffalo SabresCalgary FlamesCarolina HurricanesChicago BlackhawksColorado AvalancheColumbus Blue JacketsDallas StarsDetroit Red WingsEdmonton OilersFlorida PanthersLos Angeles KingsMinnesota WildMontreal CanadiensNashville PredatorsNew Jersey DevilsNew York IslandersNew York RangersOttawa SenatorsPhiladelphia FlyersPhoenix CoyotesPittsburgh PenguinsSt. Louis BluesSan Jose SharksTampa Bay LightningToronto Maple LeafsVancouver CanucksWashington CapitalsLOCATIONAnaheim, CAAtlanta, GABoston, MABuffalo, NYCalgary, ALRaleigh, NCChicago, ILDenver, COColumbus, OHIrving, TXDetroit, MIEdmonton, ALSunrise, FLLA, CASt. Paul, MNMontreal, QCNashville, TNE. Rutherford, NJPlainview, NYNew York, NYKanata, ONPhiladelphia, PAScottsdale, AZPittsburgh, PASt. Louis, MOSan Jose, CATampa, FLToronto, ONVancouver, BCWashington, DCTeams-Location


UNIFIED REPORT OF OPERATIONSREPORTING PACKAGE2002-03 FINAL RESULTSPLEASE READ THE INSTRUCTIONS CAREFULLY, AS REVISIONS HAVE BEENMADE TO THE URO FORMS/SCHEDULES AND INSTRUCTIONS THIS YEAR. ITIS IMPORTANT THAT YOU USE THE URO SCHEDULES AS PROVIDED AND NOTINSERT OR DELETE ANY LINE ITEM. IT IS ALSO IMPORTANT THAT YOUCOMPLETE ALL THE URO SCHEDULES OR CLEARLY MARK “N/A” IF NON-APPLICABLE, OTHERWISE THE URO PACKAGE WILL NOT BE CONSIDERED ASCOMPLETED. IF YOU HAVE ANY QUESTIONS ON HOW OR WHERE TO REFLECTA TRANSACTION, CALL CRAIG HARNETT OR JOSEPH DE SOUSA AT THELEAGUE OFFICE.URO Instructions – September 200312/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING PACKAGEINDEXPage(s)REPORTING PACKAGEGeneral Instructions 3-4<strong>Report</strong> of Independent Auditors 5Filing Instructions 6URO SCHEDULESSchedule I – Summary 7Schedule II – Revenues 8-11Schedule III – Player Costs 12Schedule IV – Team Operating Costs 13Schedule V – Team Development Costs 14Schedule VI – Arena & Building Operations 15Schedule VII – General & Administrative 16Schedule VIII – Advertising, Marketing, PR & Ticket Sales 17Schedule IX – Balance Sheet Information 18Schedule X – Cash Flow Information 19Schedule XI – Team Debt Information 20Schedule XII – Related Party Transactions 21Schedule XIII – Allocations 22Schedule XIV – Arena Statistics 23Supplementary Information To Schedule III 24-26REPORTING INSTRUCTIONS 27-46APPENDICESAppendix A – Regular Season Information 47Appendix B – Playoff Season Information 48URO Instructions – September 2003 212/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING PACKAGEURO GENERAL INSTRUCTIONSThe League is required by the Board of Governors to obtain financial and other relatedinformation from member Clubs to <strong>com</strong>pile the annual Unified <strong>Report</strong> of Operations("URO").The objectives of the URO are to 1) reflect the financial performance of the League on auniform <strong>com</strong>bined basis, 2) provide Clubs with information on League averages andstatistics, and allow individual Teams to rank their particular performance relative toleague-wide performance, and 3) provide the League with information to enable it toassess the financial performance of individual Clubs. In order to achieve theseobjectives, each Team must present the information precisely as required in theseInstructions. Failure to <strong>com</strong>ply with the instructions, such as partially filling out sections,or <strong>com</strong>bining of information where not appropriate, severely limits the usefulness of theURO as a management tool to both the League and your Club.We recognize the work that will be required to <strong>com</strong>plete the URO reporting package and,we along with your partner Clubs, very much appreciate your efforts and cooperation infully <strong>com</strong>pleting the package and furnishing this information to the League.REPORTING REQUIREMENTSAccounting Principles -It is not required that any Club change its present chart of accounts and/oraccounting principles. However, for <strong>com</strong>parative reasons and consistency, it ismandatory that Clubs use the accounting principles described herein whenpreparing the URO. It is highly re<strong>com</strong>mended that to the extent possible a Club usethe same accounting principles for financial statement purposes and URO purposesto simplify its preparation and minimize the costs.Period Covering -If your Club’s fiscal year end includes the entire 2002-03 playing season, you mustuse your annual financial statements to prepare the URO. If it does not, you must<strong>com</strong>plete the package by <strong>com</strong>piling the results of a 12-month period, which includesthe entire playing season. Supporting schedules reconciling your Club’srevenues and operating in<strong>com</strong>e/(loss) to the URO must be provided. Allinformation must be submitted on an accrual basis and follow Generally AcceptedAccounting Principles (GAAP).Currency -Canadian Clubs should report all amounts in thousands of CAD dollars and U.S.Clubs in thousands of U.S. dollars.URO Instructions – September 2003 312/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING PACKAGEAffiliated Entities -If revenues or expenses from <strong>NHL</strong> hockey related events (e.g., licensing of skyboxesor suites, concessions, parking, etc.) are included in an Affiliated Entity’s financialstatements, the entity's portion relating to hockey events should be reported in theURO in the columns entitled "Affiliated Entities".Activities relating to <strong>NHL</strong> hockey which are carried on through a parent<strong>com</strong>pany, a subsidiary <strong>com</strong>pany, a sister <strong>com</strong>pany or through any otherentity which shares <strong>com</strong>mon or family operating control with the Teamare considered “Affiliated” and <strong>NHL</strong> hockey’s share of those operations must bereflected herein. Should you or your auditors have any questions regarding theserequirements, please contact Joseph De Sousa or Lowell Heit at the League office.In other words, for purposes of preparing an accurate analysis of the financialperformance of the <strong>NHL</strong> and its member Teams, operations of all <strong>NHL</strong> hockeyrelatedactivities, including operations through Affiliates, irrespective of the legalform or ownership of the entities, is necessary.For example, if your Club or an Affiliated Entity owns, manages or operates thearena in which your Club plays in, the URO requires that you report the <strong>NHL</strong> hockeyrelated revenues and operating costs of the arena.Since non-hockey event revenues and expenses are excluded from the URO, anappropriate share of the arena fixed revenues and building operating costs shouldalso be attributed to the non-hockey events and excluded for URO purposes. Themethod of revenue/cost allocation between hockey and non-hockey may vary fromone Club to another depending on the significance of the events held in yourbuilding. In all cases, when revenues/costs are being allocated, the Club shouldfollow the following general principles:(a) The basis of allocation should be based on management's bestestimate of the economic reality of the transaction(s) and reflect areasonable approach to allocation(s).(b) The basis of allocation should be consistent to the basis used toreport prior years unless the analysis in (a) above requires change.(c) Where appropriate, the basis should be consistent to internal andexternal reporting.To the extent that revenues and/or costs are based on an allocation between hockeyand non-hockey events, mark an “X” in the space provided in the URO schedule andprovide on Schedule XIII a description of allocation principle and details of thecalculations, including the total pool of revenues/expenses being allocated. <strong>Report</strong>on a separate sheet any significant/material change in allocation method(s) used toprepare the 2002-03 URO as <strong>com</strong>pared to the allocation method(s) used to preparethe 2001-02 URO.URO Instructions – September 2003 412/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING PACKAGEURO Special Purpose Audit <strong>Report</strong> and Financial StatementsEach Club must provide the League with the Special Purpose <strong>Report</strong> as described inour memo dated September 2, 2003 and noted below along withyour Club’s audited financial statements which cover the 2002-03 playing seasontogether with a detailed reconciliation schedule of the revenues and operatingprofit/(loss) reported in the URO to the audited financial statementsThe Independent Auditor’s Special Purpose <strong>Report</strong> should read as follows:Board of Governors ofThe National Hockey League<strong>Report</strong> of Independent AuditorsWe have audited the ac<strong>com</strong>panying balance sheets of __________Member Club(the “Member Club”) as of _________, and the related statements of operations,changes in stockholders’ equity (deficit) and cash flows for the year(s) then ended.These financial statements are the responsibility of the Member Club’s management. Ourresponsibility is to express an opinion on these financial statements based on ouraudit(s). We conducted our audit(s) in accordance with auditing standards generallyaccepted in the United States [Canada - for Canadian Teams]. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation.We believe that our audit(s) provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all materialrespects, the financial position of _______ Member Club at _________, and the resultsof its operations and its cash flows for the year(s) then ended in conformity withaccounting principles generally accepted in the United States [Canada - for CanadianTeams].Our audit(s) was (were) conducted for the purpose of forming an opinion on the financialstatements taken as a whole. The Unified <strong>Report</strong> of OperationsSchedule I and XII for the ________ Member Club is presented for purposes ofadditional analysis and is not a required part of the financial statements. Suchinformation has been subjected to the auditing procedures applied in our audit(s) of thefinancial statements and, in our opinion, is fairly stated in all material respects in relationto the financial statements taken as whole.URO Instructions – September 2003 512/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING PACKAGEAs noted in the September 2, 2003 memo, this Special Purpose Audit report will be in lieu of the“Comfort Letters” previously required of all 30 clubs under the URO instructions. In addition, asmall group of clubs randomly selected by our project auditors may be required to provide an “Agreed Upon Procedures <strong>Report</strong>.” We will notify those clubs selected in October of theirselection, the additional procedures to be performed and the form of the report to be issued byyour Club’s local auditors.Obviously, because of different structures, some Clubs may require more than one entity to beaudited in order to be able to opine on both the Club and Affiliated Entity results reported in theURO. For example, to the extent that <strong>NHL</strong> hockey-related in<strong>com</strong>e or expenses are reportedthrough an Affiliated Entity and that entity is not consolidated with your Club’s results, two (ormore) Special Purpose Audit <strong>Report</strong>s may be required: one for the entity which owns the Club(i.e., the results reported in the Club column of the URO), and one for each Affiliated Entity forwhich <strong>NHL</strong> hockey-related in<strong>com</strong>e has been reported (i.e., the results reported in the AffiliatedEntity column of the URO). To the extent that an audit is done at a higher consolidated level,the auditor should be able to opine on both the Club and the Affiliated Entity results reported inthe URO in the same <strong>Report</strong>. Having said that, each club will need to work through theirindividual issues, such as different year-ends and entities with their local auditors. We have hadmany discussions with Teams and their auditors on these issues to date. As your concerns andissues arise, you should contact us for ideas, assistance or guidance, as you deem necessary.OtherThe enclosed forms and the detailed by line item instructions have been prepared toassist you in preparing your package. All amounts must be stated in thousands ofdollars. Any assumptions incorporated in the financial information that deviate fromthese specific instructions must be described to ensure the accuracy of the report.FILING REQUIREMENTS1. The <strong>com</strong>pleted URO package and ac<strong>com</strong>panying financial statements (includingarena affiliated entity’s financial statements, if appropriate) must be submitted indraft form along with the draft Special Purpose Audit <strong>Report</strong> that the auditorsare prepared to issue, to the League office no later than October 20, 2003.2. The final URO, Special Purpose Audit <strong>Report</strong> and ac<strong>com</strong>panying financialstatements must be submitted to the League office no later than November 24,2003.Submit all your information to:Lowell HeitNational Hockey League1251 Avenue of the AmericasNew York, NY, 10020P: (212) 789-2675 F: (212) 789-2060Email: lheit@nhl.<strong>com</strong>We thank you in advance for your cooperation. Should you have any questions, pleasedo not hesitate to contact us at the League office.URO Instructions – September 2003 612/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE I - SUMMARYA. Revenues (From Schedule II)Gate Receipts - Net (Section A) 1Pre-Season & Special Games - Net (Sections B & C) 2Broadcasting Revenues - Net (Sections D To G) 3New Media Revenues - Net (Sections H & I) 4In Arena Revenues - Net (Sections J To R) 5Other Hockey Revenues (Section S) 6Total Revenues - Net AB. Player Costs (From Schedule III)Major League Player Costs (Section A) 7Other Player Costs (Section A.1 To C) 8Total Player Costs BC. Other Operating CostsTeam Operating Costs (Schedule IV) 9Team Development Costs (Schedule V) 10Arena & Building Costs (Schedule VI) 11General & Administration (Schedule VII) 12Adv., Mkt., PR. & Tickets (Schedule VIII) 13Total Other Operating Costs CD. Total Operating Costs B+CE. Net Regular Season Operating Profit/(Loss) A-DClub:F. Net Playoff Profit/(Loss) EG. Net Operating Profit/(Loss) before non-oper. items E+FH. Non-Operating Items - Revenues/(Expenses)Interest In<strong>com</strong>e/(Expense) 14Interest (Expense) - Player deferred <strong>com</strong>p.14(a)Amortization Of Franchise/Expansion Fee 15Depreciation of Arena/Building 16Depreciation/Amortization - all other 17In<strong>com</strong>e From Franchise/Expansion Fee 18Contingency Reserves (Provide Details) 19Extraordinary Items (Provide Details) 20Other (Provide Details For Items Over $50,000) 21Total Non-Operating Costs HI. Net In<strong>com</strong>e/(Loss) Before Taxes G+H2002-03 URO FINAL RESULTS - P&L 7 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE II - REVENUESClub:A. Gate Receipts - Gross:Season Tickets 1Single Game Sales 2Group Sales 3Ticket Value Of Sky Box Seats 4Ticket Value Of Club/Premium Seats 5Trades/Comps 6Total Gross Gate Receipts 7Less: Admission Tax, GST & Other Taxes 8Net Gate ReceiptsAB. Pre-Season Games:Gate Receipts 9Payments From Other Teams 10Less:Arena Rent/Costs 11Team Travel, Lodging & Per Diem 12Other Direct Costs 13Net Pre-Season Games Revenue BC. Special Game Revenue - Net:Gate Receipts, Net Of Taxes 14Share Of <strong>NHL</strong> Proceeds/(Costs) 15Less:Team Travel, Lodging & Per Diem 16Other Direct Costs 17Net Special Game Revenues CD. <strong>NHL</strong> TV Revenues - Net:<strong>NHL</strong> T.V. Revenue, Net Of Direct Charges 18CRT Rights 19Prior Year Adjustment 20Net <strong>NHL</strong> T.V. Revenues D2002-03 URO FINAL RESULTS - P&L 8 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE II - REVENUES (CONT'D.)Club:E. Local Broadcasting Revenues - Net:Rights/Broadcast Fees (incl. Invasion fees) 21Advertising & Other Revenue 22Less:Agency Commissions 23Announcers 24Production/Station Fees 25Other Direct Costs 26Net Local Broadcasting Revenues EF. Local Cable TV Revenues - Net:Rights/Broadcast Fees 27Advertising & Other Revenue 28Less:Agency Commissions 29Announcers 30Production/Station Fees 31Other Direct Costs 32Net Local Cable TV Revenues FG. Local Radio Revenues - Net:Rights/Broadcast Fees 33Advertising & Other Revenue 34Less:Agency Commissions 35Announcers 36Production/Station Fees 37Other Direct Costs 38Net Local Radio Revenues GH. Local Pay Per View & Satellite - Net:Rights Fees, Advertising & Other Revenue 39Less:Other Direct Costs 40Net Local Pay Per View & Satellite Revenues H2002-03 URO FINAL RESULTS - P&L 9 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE II - REVENUES (CONT'D.)Club:I. Internet Revenues - Net:Banner Ads 41Licensing Fees 42Sponsorship 43Gross Barter Revenue 44Other Revenues 45Less: Salaries, Fees & Other Direct Costs 46Net Internet Revenues IJ. Publications-Program Revenue - Net:Advertising Revenue 47Sales Of Programs 48Less:Production Costs 49Other Direct Costs 50Net Publications Program Revenue JK. Arena Novelty Revenue - Net:Gross Sales 51Less:Product Costs 52Other Direct Costs 53Net Arena Novelty Revenue KL. Non-Arena Novelty Revenue - Net:Gross Sales 54Less:Product Costs 55Other Direct Costs 56Net Non-Arena Novelty Revenue LM. Concessions Revenue - Net:Gross Sales 57Less:Product Costs 58Other Direct Costs 59Net Concessions Revenues M2002-03 URO FINAL RESULTS - P&L 10 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE II - REVENUES (CONT'D.)Club:N. Luxury Box (Suites) Revenue - Net:Licensing Fees 60Less:Ticket Value In Gate Receipts 61Line left blank intentionally 62Other Direct Costs 63Net Sky Box Revenues NO. Club/Premium Seat Revenue - Net:Licensing Fees 64Less:Ticket Value In Gate Receipts 65Other Direct Costs 66Net Club/Premium Seat Revenues OP. Dasher Board Revenues - Net:Revenues 67Less: Commissions, Agency Fees & Other 68Net Dasher Board Revenues PQ. Signage Revenues - Net:In-Ice 69Building Naming Rights 70Scoreboard 71Zamboni 72Concourse 73All Other 74Less: Commissions, Agency Fees & Other Costs 75Net Signage Revenues QR. Parking Revenues - Net:Gross Revenues 76Less: Salaries/Fees & Other Direct Costs 77Net Internet Revenues RS. Other Hockey Revenues:<strong>NHL</strong> Enterprises Rights 78ICE Dividend & Prior Year Adjustments 79Sponsorship & Promotional Revenues 80Canadian Currency Assistance Rev./(Exp.) 81Other Revenues 82Total Other Hockey Revenues SGRAND TOTAL OF REVENUESA To S2002-03 URO FINAL RESULTS - P&L 11 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE III - PLAYER COSTSClub:A. Major League Player Costs:Base Salaries 1Signing Bonuses Expensed for Major Lge. Players 2Signing Bonuses Expensed for Minor Lge. Players 3Contract/Performance Bonuses 4<strong>NHL</strong> Awards (Per CBA) 5Left blank intentionally 6Deferred Compensation 7Buyouts 8Total Salary & Bonuses Paid to Players APlayer Benefits:Pension 9Worker's Compensation 10Medical/Dental Insurance 11Life & Other Insurance 12Player Per Diem (Excluding Pre-Season) 13Payroll Taxes & Other Benefits 14Total Player Benefits 15Total Major League Player Costs A.1B. Minor League Player Costs:One-Way Salaries 16Two-Way Salaries 17Bonuses 18Total Salary & Bonuses Paid to Players 19Player BenefitsWorker's Comp./Med./Dent. & Other Ins. 20Payroll Taxes & Other Benefits 21Total Player Benefits 22Minor League (Recoveries)/Payments 23Total Minor League Player Costs - Net BC. Other Player Costs:Payments To Federations/Acquisition Costs 24<strong>NHL</strong>PA Payments - Games 83 & 84 25Player Movement Costs 26Player Medical & Other Costs 27Total Other Player Costs CTOTAL PLAYER COSTSA To C2002-03 URO FINAL RESULTS - P&L 12 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE IV - TEAM OPERATING COSTSClub:Major LeagueA. <strong>NHL</strong> General Manager & Coaches Costs:Salaries 1Payroll Taxes & Other Benefits 2Total GM's & Coaches Costs AB. Trainers Costs:Salaries 3Payroll Taxes & Other Benefits 4Total Trainers Costs BC. Other Team Costs:Team Travel & Lodging (Charter $______:Hrs_____) 5Sticks 6Protective Equip., Uniforms, & Other Supplies 7Practice Facilities 8Moving Costs (Non-Players) 9Team Medical Costs 10Insurance (Team Is Beneficiary) 11Other Costs 12Total Other Team Costs CD. <strong>NHL</strong> Assessments:League Operating Assessment - Grossed Up 13Less: <strong>NHL</strong> Awards Paid By <strong>NHL</strong> 14Prior Year Adjustments 15Total <strong>NHL</strong> Assessments DTOTAL TEAM OPERATING COSTSA To D2002-03 URO FINAL RESULTS - P&L 13 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE V - TEAM DEVELOPMENTClub:Minor LeagueA. General Manager & Coaches Costs:Salaries & Benefits 1Travel, Lodging & Other 2Total Minor League GM's & Coaches Costs AB. Trainers Costs:Salaries & Benefits 3Other 4Total Trainers Costs BC. Other Minor League Team Costs:Team Travel & Lodging 5Sticks, Uniforms & Equipment 6Other 7Total Other Minor League Team Costs CD. <strong>NHL</strong> Minor League Assessments:Line left blank intentionally 8Amateur League Assessments 9Other Assessments 10Total <strong>NHL</strong> Minor League Assessments DTotal Minor League CostsA To DOther Development CostsE. Scouting Costs:Salaries & Benefits 11Travel, Lodging & Other 12Total Scouting Costs EF. Training Camp Expenses:Player Travel 13Player Lodging 14Players' Per Diem & Training Allowance 15Other Staff Travel Costs 16Practice & Training Facilities Costs 17Other Training Camp Costs 18Total Training Camp Expenses FTOTAL DEVELOPMENT TEAM COSTS A To F2002-03 URO FINAL RESULTS - P&L 14 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE VI - ARENA & BUILDINGClub:A. Arena & Building Operations Costs:Arena Rent 1Security 2Repairs & Maintenance 3Ambulance & First Aid Costs 4Minor Officials (Off-Ice Officials) 5Arena Personnel (Salaries & Benefits) 6Line left blank intentionally 7Property & Liability Insurance 8Property Taxes 9Other Costs 10Total Arena Operations Costs AB. Ticket Office Costs (Box Office):Salaries & Benefits 11Ticket Printing 12Credit Card Fees 13Other 14Total Ticket Office Costs BTOTAL ARENA & BUILDING COSTSA To B2002-03 URO FINAL RESULTS - P&L 15 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE VII - G & AClub:A. Staffing:Salaries & Benefits 1Travel, Lodging & Entertainment 2Management Fee 3Other 4Total Staffing Costs AB. Office Costs & Other Administrative Costs:Office Rent & Facility Costs 5Property, General & Other Insurance 6Telephone, Fax, & Communications 7Postage & Couriers 8Supplies & Other 9Professional Fees 10Other Costs 11Total Office & Other Administrative Costs BTOTAL G & A COSTSA To B2002-03 URO FINAL RESULTS - P&L 16 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Note: Please input in yellow/shaded area only.Mark "X"ClubAffiliated EntitiesDo not add or delete lines. if allocation Regular RegularEnter amounts in thousand of local dollars. Line # Used Season Playoffs Season PlayoffsSCHEDULE VIII - ADV., MKT., PR., & OTHERA. Marketing:Salaries & Benefits 1Ticket Trade Out Cost 2Travel, Lodging, Entertainment & Other 3Total Marketing AB. Advertising:Salaries & Benefits 4Travel, Lodging & Entertainment 5Commissions 6Sales Materials 7Media Advertising Costs 8Other 9Total Advertising BC. Ticket Sales:Salaries & Benefits 10Travel & Entertainment 11Commissions 12Sales Materials & Supplies 13Ticket Trade Out Cost 14Credit Card Fees 15Line left blank intentionally 16Other 17Total Ticket Sales Expense CD. Public Relations:Salaries & Benefits 18Travel & Entertainment 19Media Guide 20Other 21Total Public Relations DE. Other (Community Relations,Special Projects, Mascot,Merchandise Marketing, etc.):Salaries & Benefits 22Travel & Entertainment 23Donations 24Other 25Total Other EClub:TOTAL ADVERTISING, MARKETING,PUBLIC RELATIONS & TICKETSALES EXPENSESA To E2002-03 URO FINAL RESULTS - P&L 17 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Club:Note: Please input in yellow/shaded area only.Do not add or delete lines.Enter amounts in thousand of local dollars. Line # Club Affiliated Entity TotalSCHEDULE IX - BALANCE SHEETA. AssetsCurrent Assets - Total 1Non-Current Assets:Hockey Operations 2Non-Hockey Operations 3Deferred Compensation Funding 4Loans To Affiliated Entities 5Loans To Owner(s) And/Or Family Members 6Total Non-Current Assets 7TOTAL ASSETSAB. LiabilitiesCurrent LiabilitiesHockey Operations Related:Deferred Revenues 8Deferred Compensation 9Arena Related Debt 10Operating Debt 11Other 12Non-Hockey Related Debt 13Total Current Liabilities 14Non-Current LiabilitiesHockey Operations Related: 15Deferred Revenues 16Deferred Compensation - Players 17Deferred Compensation - Other 18Arena Related Debt 19Operating Debt 20Loans From Affiliated Entities 21Loans From Owner(s) And/Or Family Members 22Other 23Total Non-Current Liabilities 24TOTAL LIABILITIESTOTAL SHAREHOLDER'S (OWNER'S) EQUITYTOTAL LIABILITIES & OWNER' EQUITYBCB To C2002-03 URO FINAL RESULTS - BALANCE SHEET 18 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Club:Note: Please input in yellow/shaded area only.Do not add or delete lines.Enter amounts in thousand of local dollars. Line # ClubSCHEDULE X - CASH FLOW FROM OPERATIONSA. Net In<strong>com</strong>e/(Loss) Before Taxes (From Page 4, Section I) AB. Non Cash (Revenues)/Expenses:Depreciation & Amortization 1Deferred Compensation - Expense 2Deferred signing bonuses 3Deferred Revenues Received In Prior Years 4Other 5Subtotal BC. Source Of Funds:Borrowings 6Capital Infusion 7Deferred Revenues To Be Recognized In Future Years 8Other 9Subtotal CD. Use Of Funds (Enter As Negatives):Loan Repayments 10<strong>NHL</strong> CBA Fund 11Capital Expenditures 12Deferred Compensation - Payments 13Deferred signing bonuses - Payments 14Other 15Subtotal DE. Increase/(Decrease) In Cash & Cash Equivalents A To DF. Cash & Cash Equivalents At Beginning Of Year FCASH & CASH EQUIVALENTS AT END OF YEARE+FG. Outstanding Secured DebtBalance At The Beginning Of The Year 16Borrowings 17Loan Repayments 18TOTAL OUTSTANDING SECURED DEBTG2002-03 URO FINAL RESULTS - CASH FLOW STATEMENT 19 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Club:Note: Please input in yellow/shaded area only.Do not add or delete lines.Enter amounts in thousand of local dollars. Line # ClubSCHEDULE XI - TEAM DEBTA. Maximum Secured Debt Available (Including Letters Of Credit) AB. Outstanding Secured DebtBorrowed Secured Debt (From Schedule X, Section G) 1Letters Of Credit 2Other 3Total Outstanding Secured Debt BExcess Secured Debt Available 4% OF SECURED DEBT OUTSTANDING B/AC. Outstanding Unfunded Deferred CompensationPlayers 5Other 6TOTAL OUTSTANDING UNFUNDED DEFERRED COMPENSATIONCD. Outstanding DebtSecured Debt Relating To Building Sum Of Lines 7 & 8 Should 7Other Secured Debt Tie To Section B Above 8Deferred Compensation (From Section C) 9Unsecured 10Other 11Total Outstanding Debt DE. Total Team Equity/Partnership Capital EDEBT AS A % OF TEAM EQUITY D/E2002-03 URO FINAL RESULTS - TEAM DEBT 20 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)Club:Note: Please input in yellow/shaded area only.Included OnDo not add or delete lines. URO UROEnter amounts in thousand of local dollars. Amount Schedule AmountSCHEDULE XII - RELATED PARTY / AFFILIATED ENTITY TRANSACTIONSA. Payments Made By Club To Owner(s) &Family Members, Including Salaries & Benefits, managementfees and expense reimbursements: (Do not specify names)1.2.3.4.B. Payments Received By Club From Owner(s) &Family Members:(Do NOT Specify Names)Subtotal A1.2.3.4.C. Payments or Charges Over $25 thousand Made ByThe Club To Affiliated Entities:(Specify Entity Name)Subtotal B1.2.3.4.Subtotal CD. Payments Or Charges Over $25 thousand Received ByThe Club From Affiliated Entities:(Specify Entity Name)1.2.3.4.Subtotal DNET RELATED PARTY TRANSACTIONSA-B+C-D2002-03 URO FINAL RESULTS - RELATED PARTY TRANSACTIONS 21 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations - Allocations2002-03 Final Results(Thousands of Dollars)SCHEDULE XIII - ALLOCATIONSTotal Revenues/URO Amount <strong>Report</strong>ed in URO ExpensesSchedule Section Line Club Affiliated Allocable Allocation basis2002-03 URO FINAL RESULTS - ALLOCATION 22 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of Operations2002-03 Final Results(Thousands of Dollars)SCHEDULE XIV - BUILDING STATISTICSNumber of TOTAL TOTALEvents PAID ADMISSIONS GATE RECEIPTS(,000) ($,000)<strong>NHL</strong> Preseason<strong>NHL</strong> Regular season<strong>NHL</strong> PlayoffsNBA PreseasonNBA Regular seasonNBA PlayoffsOther sporting eventsMajor concerts/showsMinor events¹- - -¹ E.g., use of conference room or a charity dinner on the arena floor.2002-03 URO FINAL RESULTS - ARENA STATS 23 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of OperationsSupplemental Information To Schedule III - 2002-03(Thousands of Dollars)Major League Player CostsClub:Games PerformanceDeferredBase Salary Signing Bonus <strong>NHL</strong> Awards BuyoutPlayed Bonus BonusesCompensationA. Players With <strong>NHL</strong> Contracts Who Spent The EntireSeason In The Major League:1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.19.20.21.22.23.24.25.Subtotal A2002-03 URO FINAL RESULTS - SUPPLEMENTAL PLAYER INFORMATION 24 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of OperationsSupplemental Information To Schedule III - 2002-03(Thousands of Dollars)Major League Player CostsClub:Games PerformanceDeferredBase Salary Signing Bonus <strong>NHL</strong> Awards BuyoutPlayed Bonus BonusesCompensationB. Players With <strong>NHL</strong> Contracts Who Spent Part OfThe Season In The Minor League:(Portion Charged To Major League Only)1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.Subtotal BC. Players Released Or Bought Out During The Year:1.2.3.4.5.6.7.8.Subtotal C2002-03 URO FINAL RESULTS - SUPPLEMENTAL PLAYER INFORMATION 25 12/18/2003 10:50 AM


National Hockey LeagueUnified <strong>Report</strong> of OperationsSupplemental Information To Schedule III - 2002-03(Thousands of Dollars)Major League Player CostsClub:Games PerformanceDeferredBase Salary Signing Bonus <strong>NHL</strong> Awards BuyoutPlayed Bonus BonusesCompensationD. Players Who Played For The Club In The PriorSeason For Whom The Club IncurredCompensation Costs In The 2002-03 Season:1.2.3.4.5.6.7.8.9.10.Subtotal DE. Other: (Please Specify)1.2.3.4.5.6.7.8.Subtotal EGrand Total A To EThe Above Grand Total Must Reconcile To TheFollowing Line Of Schedule III Of The UROLine 1 Line 2 Line 4 Line 4 Line 5 Line 7 Line 82002-03 URO FINAL RESULTS - SUPPLEMENTAL PLAYER INFORMATION 26 12/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSURO INSTRUCTIONSGENERALAmounts relating to the regular season should be reported in the "Regular Season"column and amounts relating to the playoffs should be reported in the "Playoffs" column.If amounts relate to the entire season (i.e., regardless if your Team participates in theplayoffs), then report the full amount in the "Regular Season" column.To the extent that hockey related revenues and expenses are recorded in an AffiliatedEntity (as defined), these amounts should be reported in the "Affiliated Entities" columnon the same basis as noted above.Amounts reported must cover a 12-month period that includes the 2002-03 regular andplayoff seasons.Canadian Clubs should report all amounts in thousands of CAD dollars and US Clubs inthousands of US dollars.To the extent that amounts reported in the URO should agree to amounts reported inLeague <strong>Report</strong>s (such as the Gate Receipts <strong>Report</strong>) but do not, all amounts should bereconciled and footnoted. Appendices outlining amounts reported by each Club to theLeague during the season have been included. Please keep in mind that, in some cases,variances may result due to the fact that financial statement presentation differs fromthe presentation used in League <strong>Report</strong>s. Although no adjustments are required,explanations for variances over $50,000 are required. An example would be the "GateReceipts <strong>Report</strong>" in which "Trades" are excluded and included for financial statementand URO purposes. Another example would be where amounts accrued by your Club foryear-end purposes differ from amounts reported by the League. Differences related toaccruals should reverse from one year to the next and, therefore, no adjustments arerequired as long as Generally Accepted Accounting Principles are followed.URO Instructions – September 2003 2712/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE I - SUMMARYPlease <strong>com</strong>plete Schedules II through VIII before <strong>com</strong>pleting Schedule I.A. Revenues<strong>Report</strong> totals from Schedule II.B. Player Costs<strong>Report</strong> totals from Schedule III.C. Other Operating Costs<strong>Report</strong> totals from Schedule IV through VIII.D. Total Operating CostsSum of sections B and C.E. Net Regular Season Operating Profit /(Loss)Sum of section A less section D.F. Net Playoffs Profit/(Loss)Transfer net playoffs from the "Playoffs" column.G. Net Operating Profit (Loss) before Non-Operating ItemsSum of sections E and F.H. Non Operating ItemsInterest In<strong>com</strong>e (Expense) - line 14 – 14(a)<strong>Report</strong> all interest in<strong>com</strong>e/(expense) relating to your Club’s debt and investmentin<strong>com</strong>e (interest, dividends and investment gains/(losses). To the extent thatinterest in<strong>com</strong>e/(expense) relating to hockey operations has been incurred orreported in an Affiliated Entity, report this amount in the "Affiliated Entities" column.Interest relating to deferred <strong>com</strong>pensation or deferred signing bonuses should bereported separately on line 14(a).URO Instructions – September 2003 2812/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE I - SUMMARY - ContinuedDepreciation/Amortization - line 15-17<strong>Report</strong> on line 15 amortization relating to expansion costs or franchise fees, as wellas amortization expense relating to the acquisition of original franchise players.<strong>Report</strong> on Line 16 all depreciation relating to the construction of or capitalimprovements to your arena/building. <strong>Report</strong> all other depreciation/amortization online 17.In<strong>com</strong>e from Franchise/Expansion Fees - line 18<strong>Report</strong> expansion in<strong>com</strong>e recognized during the year.Contingencies - line 19<strong>Report</strong> contingency reserves provided for during the year (e.g., litigation reserves).Provide details for reserves over $50,000.Government SubsidiesPlease note the following change: Government payments/grants are no longer to bereported as a non-operating item. Starting with the 2002-03 season, anygovernment payments/grants that are cash reimbursements of operating costs mustbe reported as an offset to the particular cost and reported as such in theappropriate costs line in the URO. For example, if government grants are contingenton building operating cost spending, then they should be reported as a reduction ofbuilding costs. Any grants contingent on capital spending must be reported as areduction to capital spending and any related amortization or depreciation must bereported on Schedule I, section H. All other grants not contingent on spending mustbe reported as Other Hockey Revenues in Schedule II, line 82.On a separate page provide a brief summary of the condition(s) and term(s)regarding these payment(s) (e.g., one time subsidy).Other<strong>Report</strong> all other non-operating items or non-<strong>NHL</strong> hockey items (e.g., gains or lossesfrom minor league operations or operations from practice/rink facilities). This lineshould not be used for reporting operating items such as severance charges. Alloperating items not specifically otherwise directed should be charged/reported to theappropriate operating expense/revenue line.I. Net In<strong>com</strong>e / (Loss) before TaxesSum of sections G and H.URO Instructions – September 2003 2912/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE II – REVENUESGeneral: All costs charged to (or netted against) revenue must be reasonableand customary costs directly relating to the type of revenues being reported,except for depreciation and leasehold amortization expenses, which must bereported on Schedule I, section H.A. Net Gate ReceiptsInclude gross regular season and gross playoff ticket sales, and net out admission,GST and other Provincial and State or local taxes on line 8. For the regular season,the net amount should be reconciled to the amount reported in the League's GateReceipt <strong>Report</strong> (see Appendix A). The net playoff gate receipts should be reconciledto the amount reported in the League's Playoff <strong>Report</strong> (see Appendix B). Variancesover $50,000 should be explained in the margin. The ticket value of luxury suiteseats and club seats should be reported on line 4 and 5, respectively. The remainderof the luxury box rental and club seat premiums must be reported in section N andO, respectively. Pre-season gate receipts must be reported in section B. Gatereceipts from special games must be reported in section C.B. Pre-Season Games - NetInclude revenues derived from gate receipts, net of taxes, related to pre-seasongames (line 9) and payments received or paid from other Teams participating in preseasongames (line 10). Any novelty and concessions sales related to pre-seasongames should be reported in sections K and M, respectively. Net revenues fromskyboxes, dasherboards, signage and parking should be reported in sections Nthrough R. Direct costs relating to pre-season games that are reasonable andcustomary thereto must be reported on lines 11 to 13. Pre-Season officiating costsbilled by the <strong>NHL</strong> should be reported on line 13. Training camp costs should bereported in Section F of Schedule V. All amounts should be reported in the regularseason column.C. Special Game Revenues - NetInclude all revenues and expenses relating to special games such as WorldCup/International games, games played against the Olympic Teams, the All StarGame, etc. Proceeds (costs) paid by (to) the <strong>NHL</strong> with respect to <strong>NHL</strong>/<strong>NHL</strong>PA JointVenture or games should be reported on line 15. Pre-season games should bereported in section B. Direct costs relating to special games that are reasonable andcustomary thereto must be reported on lines 16 to 17.URO Instructions – September 2003 3012/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE II - REVENUES - ContinuedD. <strong>NHL</strong> T.V. Revenues - NetInclude all revenues derived from <strong>NHL</strong> contracts (CBC/TSN agreements, ABC/ESPN,Outer Market Fees and other <strong>NHL</strong> TV revenues, etc.) net of <strong>NHL</strong> direct broadcastingcharges. The amount reported on line 18 should include fiscal year end distributionaccruals and should be reconciled to the net amount disclosed in Appendix A.Variances, if any, should be explained in the margin. On line 19, report the CRTrevenues reported in Appendix A. All amounts should be reported in the regularseason column.E. Local Broadcasting Revenues - NetInclude all local broadcasting revenues, and net out reasonable and customary directcosts related thereto, (e.g., talent, production, travel, out-of-market fees paid (net ofdirect reimbursements from third parties) including any local pre-seasonbroadcasting revenues, other than <strong>NHL</strong> T.V. revenues (Section D). Revenues andexpenses directly relating to playoffs should be reported in the playoff column. Ifrevenues are earned regardless of whether your Team participates in the playoffs,then report the full amount in the regular season column. For Canadian Clubs, anyamount of “invasion” fees paid to your Club by the League from the national rightsmust be included herein.F. Local Cable T.V. Revenues - NetRevenues and direct costs related to local Cable T.V. must be accounted for in thesame manner as noted in section E.G. Local Radio Revenues - NetRevenues and direct costs related to Local Radio must be accounted for in the samemanner as noted in section E.H. Local Pay Per View and Satellite Revenues - NetRevenues and direct costs related to local Pay Per View and Satellite must beaccounted for in the same manner as noted in section E.I. Internet Revenues - Net<strong>Report</strong> revenues and reasonable and customary direct costs related to thedevelopment and production of your Club’s website.URO Instructions – September 2003 3112/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE II - REVENUES - ContinuedJ. Publication - Program Revenues - NetInclude revenues derived from advertising in publications and sale of publications(ex. programs, calendars, fact books), and all direct costs reasonable and customarydirectly related to publications.K. Arena Novelty Revenues - NetInclude revenues and reasonable and customary direct costs relating thereto derivedfrom game day sales.L. Non-Arena Novelty Revenues - NetInclude novelty revenues and reasonable and customary direct costs relating theretoother than arena novelty sales (Section K).M. Concession Revenues - NetInclude all concession revenues and reasonable and customary direct costs relatingthereto derived from game day sales. Direct expenses, however, should exclude anydepreciation and/or leasehold amortization expenses that should be reported onSchedule I, section H.N. Luxury Box (Suites) Revenues - NetInclude the gross portion of the luxury box (including hospitality/game day suite)revenues earned by your Club. The ticket value of luxury box seats that is includedon line 60 should be deducted on line 61. The amount deducted should be the sameas the amount reported on line 4 (Section A). <strong>Report</strong> on line 63 all reasonable andcustomary direct costs relating to luxury suite operations for which revenues on line60 were derived, except for any depreciation and/or leasehold amortization expense,which are to be reported on Schedule I, section H.O. Club/Premium Seat Revenues - NetInclude the gross portion of the club/premium seat revenues earned by your Club.The ticket value of club/premium seats included on line 64 should be deducted online 65. The amount deducted should be the same as the one reported on line 5(Section A). If the full value of club seats is included in Gate Receipts (Schedule II,section A) and no extra premium is charged, please note “no premium” on line 64.<strong>Report</strong> on line 66 all reasonable and customary direct costs relating to club seatoperations for which revenues on line 64 were derived, except for any depreciationand/or leasehold amortization expense, which should be reported on Schedule I,section H.URO Instructions – September 2003 3212/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE II - REVENUES - ContinuedP. Dasherboard Revenues - NetInclude your Club’s gross share of dasherboard advertising revenues less<strong>com</strong>missions, agency fees and other reasonable and customary direct costs relatingthereto.Q. Signage Revenues - NetInclude your Club’s gross share of all signage-advertising revenues less <strong>com</strong>mission,agency fees and other reasonable and customary direct costs relating thereto. Anycontracts for fixed signage in excess of five years and $2.5 million value over the lifeof the contract must be recognized on a straight line basis over the term of thecontract.R. Parking Revenue - NetInclude your Team’s gross share of parking revenues and net out reasonable andcustomary direct costs relating thereto.S. Other Hockey Revenues<strong>NHL</strong> Enterprises Royalties - line 78<strong>Report</strong> your Club’s share of <strong>NHL</strong> Enterprises' rights fees used as funding creditsagainst League dues. The amount should agree to the amount reported in AppendixA.Prior Year Adjustments - line 79<strong>Report</strong> any prior year timing differences relating to your Club’s share of the <strong>NHL</strong>Enterprises Royalties.Sponsorship and Promotional Revenues - line 80<strong>Report</strong> all revenues from sponsorship and promotions not reported in other sectionsof Schedule II.Currency Assistance Program (Assessment) Subsidy - line 81<strong>Report</strong> your Club’s share of the 2002-03 Currency Assistance Programs (Phase I andPhase II). <strong>Report</strong> the amount assessed as a negative and subsidy received as apositive.If your Club received a subsidy under the program (either phase I or phase II),report this amount as revenue here less the assessment noted above.URO Instructions – September 2003 3312/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE II - REVENUES - ContinuedGovernment Subsidy / Other Revenues – line 82<strong>Report</strong> all government payments/grants that are not contingent on operating orcapital spending. Government payments/grants that are in substancereimbursements of operating costs must be reported as an offset to the particularcost item and reported as such in the appropriate costs line in the URO. Forexample, if government grants are contingent on building operating cost spending,then they should be reported as a reduction of building costs. Any grants contingenton capital spending must be reported as a reduction to capital spending and anyrelated amortization or depreciation expense must be reported on Schedule I, sectionH. All other grants not contingent on spending must be reported here as OtherHockey Revenues.<strong>Report</strong> all other miscellaneous revenues, net of reasonable and customary directcosts related to these revenues. It must not include items such as interest in<strong>com</strong>e,revenues from sale of players or expansion in<strong>com</strong>e, for which these amounts mustbe reported in section H of Schedule I. Provide details for all categories that exceed$50,000.URO Instructions – September 2003 3412/18/2003 10:50 AM


SCHEDULE III - PLAYER COSTSUNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSIt is important that this section exclude non-player related costs (e.g., bonuses paidto coaches & trainers, locker room personnel, etc.)A. Major League Player CostsAccounting Principles -For financial statement purposes and/or taxation purposes, each Club mayrecognize certain player <strong>com</strong>pensation (such as signing bonuses, deferred<strong>com</strong>pensation, etc.) using different accounting principles. For example, oneTeam may recognize a player's signing bonus on a cash basis, whereas anotherTeam may recognize this over the term of the player contract. For purposes ofthe URO the following Accounting Principles must be used unless reporting itdifferently would not result in a material difference.Base Salary - line 1<strong>Report</strong> the base amount paid to the player in the year.Signing Bonuses - lines 2 & 3Signing bonuses must be capitalized and amortized over the term of the contract,excluding the option year. If a player is traded, then the unamortized amount ofthe signing bonus must be expensed in the year the player is traded or assignedto the new players being picked up in the trade so long as equal asset value isreceived and the amortization term is not extended. Signing bonuses paid torookies and paid for by the <strong>NHL</strong> Club should be reported here under the sameprinciple noted above.If a signing bonus is deferred, then the present value of the total signing bonus(discounted at your Club’s incremental borrowing rate) and amortized over thefixed term of the contract must be reported here. The related interest<strong>com</strong>ponent must be reported on Schedule I, Section H, line 14(a).Contract/Performance Bonuses - line 4Both Team and individual performance bonuses must be recognized in theseason the bonus is earned.<strong>NHL</strong> Awards - line 5<strong>Report</strong> player <strong>NHL</strong> Awards/Pool paid by the League as collectively agreed withthe <strong>NHL</strong>PA in the "Playoffs" column. <strong>Report</strong> the same amount as a credit on line14 of Schedule IV in the "Playoffs" column. This amount should agree to thefigures reported in Appendix B.URO Instructions – September 2003 3512/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE III - PLAYER COSTS - ContinuedDeferred Compensation - line 7<strong>Report</strong> the present value of the deferred <strong>com</strong>pensation earned in the currentseason (discounted at your Club’s incremental borrowing rate). The relatedinterest <strong>com</strong>ponent must be reported on Schedule I, Section H, line 14(a).Buyouts - line 8Include the total amounts payable per the CBA including the present value ofamounts payable in future years. If your Club does not discount for P/Lreporting purposes, please follow the instructions set out above. Buyouts aregenerally expensed in full once the management decision has been made.Supplementary Information to Schedule III -For amounts reported on lines 1 through 8 of Schedule III, please providedetailed player information on the schedules entitled "Supplementary Informationto Schedule III" (pages 24 to 26).Players' Pension - line 9<strong>Report</strong> player pension costs for the current season as provided by the NationalHockey League Pension Society (<strong>NHL</strong>PS). Please note that pension costsinvoiced by the <strong>NHL</strong>PS may include non-player pension costs. Pension costsrelating to non-players, such as scouts, must be reported in their respectivesections. Also note that amounts invoiced by the <strong>NHL</strong>PS that are in Canadiandollars should be expressed by US Clubs at the US equivalent dollars. Federaland state/provincial social security (UIC and Canadian government pension planbenefits) must be reported on line 14, "Payroll Taxes and Other Benefits".Worker's Compensation - line 10<strong>Report</strong> players' worker's <strong>com</strong>pensation premium costs.Player Insurance Costs - lines 11-12<strong>Report</strong> only insurance costs/premiums for which the player, and not the Team, isthe beneficiary (e.g., player permanent total disability premiums (PTD).Insurance costs, relating to players, for which the Team is the beneficiary shouldbe reported on line 11 of Schedule IV (e.g., temporary total disability playerpremiums). TTD insurance recoveries must be reported on Schedule III, line 27(i.e., as a reduction of Other Player Costs).URO Instructions – September 2003 3612/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE III - PLAYER COSTS - ContinuedPlayer per diem - line 13<strong>Report</strong> player per diems paid relating to the regular season and playoff season.Pre-season related per diems must be reported in Section B of Schedule II. Perdiems relating to training camp must be reported in Section F of Schedule V.Payroll Taxes and Other Benefits - line 14Include all other payments made to players or on their behalf (e.g., autoexpenses).B. Minor League Player CostsAccounting Principles -The same accounting principles noted in section "A" above should be used forsection "B".Players Playing On One-Way ContractsSalaries must be reported in section A. Teams should pro-rate a maximum of$75,000 per player to section B based on days assigned to the minor league Team.Players Playing On Two-Way ContractsSalaries and benefits must be allocated on a pro rata based on days in the MajorLeague divided by total days in the season. The Major League portion must bereported in section A and the balance in section B.All signing bonuses paid to minor league players must be reported in section A usingthe same accounting principles noted above.Minor Leagues (Recoveries) Payments - line 23<strong>Report</strong> all payments made to minor league Teams to subsidize minor league playerssalaries, benefits and other player related costs. Include all minor league recoveriesfrom the minor league Team accruing to your Club. Profit / losses from minorleague operations, except for items reported on the URO schedules III and IV, mustbe excluded from the URO or reported on Schedule I, section H, line 21 (as a netamount).URO Instructions – September 2003 3712/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE III - PLAYER COSTS - ContinuedC. Other Player CostsPayments to Federations and Player Acquisition Costs - line 24<strong>Report</strong> the current year amortization of costs capitalized to obtain players, other thanfor the acquisition of original franchise players or signing bonuses. Amortization oforiginal franchise acquisition player costs must be reported in section "H" of ScheduleI. Amortization of signing bonuses should be reported on line 2 of schedule III.IIHF assessments (for 2002-03 = US$320,000 per Team) should be reported here.<strong>NHL</strong>PA Payments for Games 83 & 84 - line 25<strong>Report</strong> the $207,000 (Canadian Clubs $201,000 local currency) assessed by theLeague on behalf of the <strong>NHL</strong>PA for games 83 & 84 per CBA and jersey litigationsettlement.Player Movement Costs - line 26<strong>Report</strong> all player relocation costs. This must not include costs relating to playerstraveling to and from games, which must be reported on line 5 of Schedule IV.Players' Medical Costs / TTD Insurance Cost Recoveries - line 27<strong>Report</strong> medical costs paid on the player's behalf, such as player surgery, etc. Donot include cost of Team physician, medical supplies or other medical costs thatshould be reported on line 10 of Schedule IV. <strong>Report</strong> any TTD insurancerecoveries received during the year.URO Instructions – September 2003 3812/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE IV - TEAM OPERATING COSTSFor Sections A through D, report amounts relating to your Club’s Major LeagueOperations. Costs relating to the Minor League Team operations must be reported inSchedule V.A. <strong>NHL</strong> General Managers & Coaches CostsInclude both current earnings and the present value of deferred earnings andbonuses. Use the same accounting guidelines for recognizing earnings as detailed insection "A" of Schedule III of the reporting instructions. If your Club’s GeneralManager also serves in an administrative capacity, such as Team president, includethe portion of his salary and benefits related to his GM function on line 1 of thissection and the balance on line 1 of Schedule VII.B. Trainers CostsInclude both current earnings and the present value of deferred earnings andbonuses. Use the same accounting guidelines for recognizing earnings as detailed insection "A" of schedule III of the reporting instructions.C. Other Team CostsTravel & Lodging - line 5Include all Team travel and lodging relating to players, GM, coaches and trainers.Players’ per diems should be included on line 13 of Schedule III. Please providecharter costs and hours flown in parenthesis.Sticks - line 6Include the cost of sticks relating to your major league Team. To the extent thatthis amount is not reported separately in your Club’s general ledger, please use yourbest estimate and report the amount here.Protective Equipment, Uniforms & Other Supplies - line 7Include pants, skates, pads, gloves, helmets and other protective equipment, as wellas sweater, socks, underwear and other non-protective equipment and supplies.Practice Facilities - line 8Include costs for ice rental, at home and on the road, and other practice facilitycosts. Any practice facility cost relating to training camp must be reported inSchedule V, Section F, line 17. Rent charges from an Affiliated Entity thatmanages, operates or own your Club’s practice facility should be at market rate. Allother revenues and expenses related to practice facilities must be excluded from theURO or reported on Schedule I, section H, line 21 (on a net basis).URO Instructions – September 2003 3912/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE IV - TEAM OPERATING COSTS - ContinuedMoving Costs - line 9Include hockey personnel (e.g., GM, coaches and trainers) relocation costs. <strong>Report</strong>player movement costs on line 26 of Schedule III.Medical Costs - line 10Include the Team physician, cost of doctors, hospital, annual examinations, medicalsupplies and other related medical costs. Medical costs paid on a player's behalfmust be included on line 27 of Schedule III.Insurance - (Team is beneficiary) - line 11<strong>Report</strong> player, GM, coach and other hockey staff insurance costs where the Team isthe beneficiary (e.g., Player temporary total disability insurance premiums (TTD)).Other Costs -Include all other costs not reported above relating to Team operations only.D. <strong>NHL</strong> AssessmentsLeague Operations - line 13Regular Season:<strong>Report</strong> the grossed up League operating assessment. This amount should agreeto the grossed up <strong>NHL</strong> Assessments (i.e., before <strong>NHL</strong> Enterprises Rights and CRTFunding Credits) reported in Appendix A.Playoffs:<strong>Report</strong> the League playoff regular, additional and pool assessments. Thisamount should agree to amounts reported in Appendix B. The <strong>NHL</strong> playoff andregular season awards paid by the League to your Club should be deducted online 14.Prior Years’ Adjustments and Other Special League Assessments - line 15<strong>Report</strong> all other special League assessments, if any.URO Instructions – September 2003 4012/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE V - TEAM DEVELOPMENT COSTSFor Sections A through D, report amounts relating to your Club’s Minor LeagueOperations . Costs relating to the Major League Team operations mus t be reported inSchedule IV.Minor League OperationsA. General Managers & Coaches CostsInclude both current earnings and the present value of deferred earnings andbonuses for minor league general managers and coaches. Use the same accountingguidelines for recognizing earnings as detailed in section "A" of Schedule III of thereporting instructions.B. Trainers CostsInclude both current earnings and the present value of deferred earnings andbonuses for minor league trainers. Use the same accounting guidelines forrecognizing earnings as detailed in section "A" of schedule III of the reportinginstructions.C. Other Minor League Team CostsInclude other costs relating to your Club’s minor league operations, such as minorleague Team travel, equipment, etc.D. <strong>NHL</strong> Minor League AssessmentAmateur League Assessment - line 9<strong>Report</strong> your Club’s share of the CHL and USA Hockey grants assessed and collectedby the League. For the 2002-03 Season, the amounts assessed per Team by theLeague were CDN$180K and US$13.3K, respectively.Payments made to other Federations, such as the IIHF, for release of players mustbe reported on line 24 of Schedule III.URO Instructions – September 2003 4112/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE V - TEAM DEVELOPMENT COSTS - ContinuedOther Team Development CostsE. Scouting CostsInclude both current earnings and the present value of deferred earnings andbonuses for all scouts. Use the same accounting guidelines for recognizing earningsas detailed in section "A" of schedule III of the reporting instructions.F. Training Camp ExpensesPlayers' Travel & Lodging - lines 13 and 14Include all training camp related player costs. All costs related to GM's, coaches andtrainers must be reported on line 16.Players' Per Diem and Training Camp Allowance - line 15<strong>Report</strong> all players per diem and allowances relating to the training camp. Non-playerper diem and allowances must be reported on line 18.URO Instructions – September 2003 4212/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE VI - ARENA AND BUILDING OPERATIONSA. Arena and Building Operating Costs<strong>Report</strong>ing change for 2002-03: All depreciation and amortization expenses should bereported on Schedule I, section H.If your Club or an affiliated entity owns, manages or operates the arena in whichyour Club plays in, report the hockey related operating costs of the arena andbuilding in this section.Since non-hockey event revenues are excluded from your Club’s or your Club’sAffiliated Entity's revenues, an appropriate share of the arena and building operatingcosts must also be attributed to the non-hockey events and excluded for UROpurposes. The method of cost allocation between hockey and non-hockey will varyfrom one to another depending on the significance of the events held in yourbuilding. In all cases, the basis of cost allocations should follow the followinggeneral principles:(a) The basis of allocation should be based on management's bestestimate of the economic reality of the transaction(s) and a reasonableapproach to allocation.(b) The basis of allocation should be consistent to the basis used toreport prior years.(c) Where appropriate, the basis should be consistent to internal andexternal reporting.To the extent that cost are based on an allocation, mark an “X” in the space providedon the URO schedule and provided on Schedule XIII a description of allocationprinciple and details the calculation, including the total pool of expenses beingallocated. <strong>Report</strong> on a separate sheet any significant/material change in allocationmethod(s) used to prepare the 2002-03 URO as <strong>com</strong>pared to the allocationmethod(s) used to prepare the 2001-02 URO.Arena Rent - line 1If your Club pays rent to an Affiliated Entity and the rent revenue is reported as acredit under the "Affiliated Entity" column, please make sure to include anappropriate share of the building operating costs. If no rent revenue is beingcredited for URO reporting purposes, under the principle that the rent charged andreported in the “Club” column represents fair market value, then no buildingoperating costs should be allocated.Arena Personnel - line 6Include costs relating to ushers, entertainment, statistics crew, timekeeper, scorer,announcer and other game personnel not included in the other classifications.URO Instructions – September 2003 4312/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE VI - ARENA AND BUILDING OPERATIONS - continuedB. Ticket Office CostsInclude all costs directly related to the ticket office operations relating to hockeyevents. If non-hockey event costs are included, the same basis of cost allocationnoted above must be used. Costs relating to the promotion of tickets must beincluded in Section C of Schedule VIII.URO Instructions – September 2003 4412/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE VII - GENERAL AND ADMINISTRATION<strong>Report</strong>ing change for 2002-03: All depreciation and amortization expenses should bereported on Schedule I, section H.To the extent that cost are based on an allocation, mark an “X” in the space providedon the URO schedule and provided on Schedule XIII a description of allocationprinciple and details of calculation, including the total pool of expenses beingallocated. <strong>Report</strong> on a separate sheet any significant/material change in allocationmethod(s) used to prepare the 2002-03 URO as <strong>com</strong>pared to the allocationmethod(s) used to prepare the 2001-02 URO.Include general and administration personnel and other related costs (such as thePresident's office, Accounting and Finance department, General Administration suchas receptionist, clerical staff, etc.) Do not include costs relating to Advertising,Marketing, Public Relations and Ticket Sales. These costs should be reported onSchedule VIII. If your Team President is also General Manager, then include theportion of his salary and benefits related to his GM functions on line 1 of schedule IVand the balance on line 1 of this schedule.SCHEDULE VIII - ADVERTISING, MARKETING, PUBLIC RELATIONS ANDTICKET SALES EXPENSEInclude those employees whose main responsibilities are in any of the departmentsmentioned above. The costs directly related to these departments should beincluded here. <strong>Report</strong> on line 8 all media advertising costs.SCHEDULE IX - BALANCE SHEET INFORMATIONHockey Club<strong>Report</strong> all assets and liabilities disclosed in the Club’s financial statements.Affiliated Entity<strong>Report</strong> all assets and liabilities disclosed in Affiliated Entities' financial statements tothe extent that these assets and liabilities are used in whole or in part to run theClub’s operations.SCHEDULE X – CASH FLOW INFORMATION<strong>Report</strong> the Club’s cash flow from operations.SCHEDULE XI – TEAM DEBT INFORMATION<strong>Report</strong> the Club’s Team debt information from operations.URO Instructions – September 2003 4512/18/2003 10:50 AM


UNIFIED REPORT OF OPERATIONSREPORTING INSTRUCTIONSSCHEDULE XII - RELATED PARTY/AFFILIATED ENTITY PAYMENTSPayment(s) To and From Owner(s) and Family Member(s)<strong>Report</strong> the total amount of payment(s) made to or received from owner(s) and/orfamily member(s). Name(s) of individual(s) to whom the payments were made to orreceived from should not be specified. Payments include, but are not limited to,salaries, fees, management and expense reimbursements, or other items credited torevenues or charged to expenses. Please indicate the URO schedule(s) and line(s) inwhich the payment(s) was charged to or from.Payment(s) and Charge(s) To and From Affiliated Entities<strong>Report</strong> all payments and charges to and from affiliated entities. Specify the name ofthe affiliated entity and the URO schedule and line to which the payment(s) wascharged to. Payments and charges should include, but are not limited to, salaries,fees, management fees and expense reimbursements, or other items credited torevenues or charged to expenses. Please indicate the URO schedule(s) and line(s) inwhich the payment(s) was charged to or from.SCHEDULE XIII - ALLOCATIONSFor each line noted as being reported in the URO pursuant to an allocation betweenhockey and non-hockey operations, please provide the URO reference, amount ofallocable revenues/costs, principle of allocation and detail of the allocationcalculation.URO Instructions – September 200312/18/2003 10:50 AM46


Appendix CURO REPORTING• MAJOR HOCKEY-RELATED REVENUES (PRE-SEASON, REGULARSEASON AND PLAYOFFS):Net Gate Receipts (Regular Season and Playoffs)Ticket revenues, net of admission taxes, earned from regular season and playoffgames.Pre-season GamesTicket revenues, net of admission taxes, earned from pre-season home games andappearance fees earned from away pre-season games.Special Game RevenueTicket revenues, net of admission taxes, and rights fees earned from<strong>NHL</strong>/<strong>NHL</strong>PA related international games (e.g., World Cup).League-Generated Broadcasting RevenuesBroadcasting right fees earned from National broadcasting agreements (i.e.,ABC/ESPN, CBC/TSN, and French language national rights).Local Broadcasting RevenuesRights fees and advertising revenues earned from broadcasting games on localover-the-air carriers.Local Cable RevenuesRights fees and advertising revenues earned from broadcasting games on localcable providers.Pay-per-viewRights fees and advertising revenues earned from broadcasting games on pay-perview.InternetRights fees, advertising revenues and sales earned from Internet site operations.Publication/Program RevenuesAdvertising revenues and sales of programs earned during <strong>NHL</strong> hockey games.


Appendix C (cont’d)Arena Novelty Revenues<strong>NHL</strong> merchandise sales earned from arena stores, shops and kiosks.Non-Arena Novelty Revenues<strong>NHL</strong> merchandise sales earned from non-arena owned stores, shops and kiosks.Concession RevenuesRevenues earned from the sale of food and beverages in the arena during <strong>NHL</strong>hockey games.Luxury Box (Suite) RevenuesLicensing fees earned from the annual rental and game day rental of luxury andhospitality suites during <strong>NHL</strong> events.Club/Premium Seat Revenues (Tickets and License Fees)Tickets and License fees earned from club seats during <strong>NHL</strong> events.Dasherboard RevenuesSponsorship revenues earned from the sale of dasherboard advertising.Signage Revenues (Scoreboard and Concourse)Sponsorship and advertising revenues earned from the sale of fixed and temporarysignage in the arena that are attributed to <strong>NHL</strong> hockey.Parking RevenuesRevenues earned from parking during <strong>NHL</strong> hockey events.Other Hockey RevenuesRevenues earned from League and team generated consumer product licensing,sponsorship and promotional revenues.


Appendix DURO REPORTINGMAJOR LEAGUE PLAYER COSTS! Player Payroll# Base Salary# Signing Bonuses# Performance Bonuses, <strong>Report</strong>ing Bonuses, etc.# Present Value of Deferred Compensation# Contract Buyouts! Benefits and Other Payments# Player Pension Benefits# Medical and Dental Insurance Benefits# Disability Insurance Benefits# Player per diems and Training Camp Allowances# Employer Payroll Taxes# Other Miscellaneous Costs! CBA Monies# Player Finish and Other Monetary Awards (Article 28)# Payments for Games 83-84 (Article 16)


Appendix EURO REPORTINGOTHER COSTS! Other Player Costs# Minor league salary and benefits, net of minor league recoveries# Payments to Federations and player acquisition costs# Player movement costs# Player on site medical costs! Team Operating Costs# General Managers, Coaches and Assistants# Athletic Trainers and Equipment Managers# Air Charter, Travel, and Lodging# Sticks and Equipment# Team Medical Staff# Practice Facility Costs# League Dues and Assessments# Other Miscellaneous Costs! Team Development Costs# Minor League Costs (Players, Coaches, and Trainers)# Scouts# Training Camp Expenses! Arena and Building Costs# Rent# Security# Property Insurance# Property Taxes# Arena Personnel! General and Administrative Costs# Legal, Finance, IT, PR, and HR Support Staff# Professional Fees# Office Supplies and Office Utilities! Selling, Marketing, and Advertising Costs# Support Staff# Commissions and Sales Materials# Media and Print Advertising


Appendix FBoard of Governors ofThe National Hockey LeagueForm of Supplementary Audit <strong>Report</strong>We have audited the ac<strong>com</strong>panying balance sheets of __________Member Club(the “Member Club”) as of _________, and the related statements of operations, changesin stockholders’ equity (deficit) and cash flows for the year(s) then ended. These financialstatements are the responsibility of the Member Club’s management. Our responsibility isto express an opinion on these financial statements based on our audit(s). We conductedour audit(s) in accordance with auditing standards generally accepted in the United States[Canada - for Canadian Teams]. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit(s)provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all materialrespects, the financial position of _______ Member Club at _________, and the results ofits operations and its cash flows for the year(s) then ended in conformity with accountingprinciples generally accepted in the United States [Canada - for Canadian Teams].Our audit(s) was (were) conducted for the purpose of forming an opinion on the financialstatements taken as a whole. The Unified <strong>Report</strong> of Operations Schedule I and XII for the________ Member Club is presented for purposes of additional analysis and is not arequired part of the financial statements. Such information has been subjected to theauditing procedures applied in our audit(s) of the financial statements and, in our opinion,is fairly stated in all material respects in relation to the financial statements taken aswhole.


Appendix GForm of Agreed Upon Procedures <strong>Report</strong>-affiliated arenaTo the National Hockey League and ClubWe have performed the procedures enumerated below, which were agreed to by you,solely to assist you with respect to the preparation of the National Hockey League’s (the“<strong>NHL</strong>”) Unified <strong>Report</strong> of Operations as of June 30, 2003 and for the year then ended.The agreed-upon procedures engagement was conducted in accordance with attestationstandards established by the American Institute of Certified Public Accountants. Thesufficiency of these procedures is solely the responsibility of those parties specified inthis report. Consequently, we make no representation regarding the sufficiency of theprocedures described below either for the purpose for which this report has beenrequested or for any other purpose. The procedures that we performed and our findingsare as follows:1. We have read the instructions for the preparation of the <strong>NHL</strong>’s Unified <strong>Report</strong>of Operations for the 2002-2003 season.2. We obtained the <strong>com</strong>pleted Unified <strong>Report</strong> of Operations for the (team) forthe 2002-2003 season.3. We read the information provided in response to Schedule XIII of the Unified<strong>Report</strong> of Operations for the 2002-2003 season.4. For the financial data included on Schedule XIII in the column “TotalRevenues/Expenses Allocable,” we agreed the amounts to the correspondingamounts in one or more audited financial statements that include the team andthe affiliated entities or in schedules that reconcile to such financialstatements.5. We agreed each amount in the “Club” and “Affiliated” column to a scheduleallocating the corresponding amount in the “Total Revenues/ExpensesAllocable” column in accordance with the URO instructions. Further, wechecked that the description in the “Allocation Basis” column is consistentwith the allocation method followed.6. We tested the mathematical accuracy of the financial data included onSchedule XIII.7. For the statistical data included on Schedule XIV, we agreed the amounts toTicketmaster or other third party reports.


Appendix G (cont’d)We were not engaged to, and did not, perform an audit the objective of which would bethe expression of an opinion on the specified elements, accounts or items. Accordingly,we did not express such an opinion. Had we performed additional procedures, othermatters might have <strong>com</strong>e to our attention that would have been reported to you.This report is intended solely for the information and use of the (team), and the <strong>NHL</strong> andtheir representatives, and is not intended to be and should not be used by anyone otherthan those specified parties.


Appendix HForm Of Agreed Upon Procedures <strong>Report</strong>- team not auditedTo the National Hockey League and clubs:We have performed the procedures enumerated below, which were agreed to by you, solely toassist you with respect to the National Hockey League’s (the "<strong>NHL</strong>") Unified <strong>Report</strong> ofOperations ("URO") as of June 30, 2003 and for the year then ended. The <strong>NHL</strong> and its membersare responsible for their respective UROs and related records. This agreed-upon proceduresengagement was conducted in accordance with attestation standards established by the AmericanInstitute of Certified Public Accountants. The sufficiency of these procedures is solely theresponsibility of the parties specified in this report. Consequently, we make no representationsregarding the sufficiency of the procedures described below either for the purpose for which thisreport has been requested or for any other purpose.The procedures that we performed and our findings are as follows:1. We obtained the trial balances for the team and the arena <strong>com</strong>pany and the URO of (insertclub name) for the year ended June 30, 2003.2. We agreed the account balances or grouping per the team trial balance to the related itemslisted in the URO of (insert club name).3. We obtained an explanation of the methodology for preparing the URO of (insert club name)and the internal controls established to provide accurate financial information.4. For revenues and expenses allocated from the arena <strong>com</strong>pany and disclosed on Schedule XIIIof the URO, we agreed the amounts on Schedule XIII to the trial balance and checked that themethod of allocation was consistent with the description of the allocation method.5. For hockey games during the season, we agreed the third-party box office reports tocash receipts records. Using attendance records and the schedule of ticket prices, weannualized gate receipts revenue.6. We selected suites in the arena, and agreed the amount per the suite revenueagreements to the cash receipts records. Based on the number of suites sold, we annualizedsuite revenue.7. We selected concourse signs in the arena and agreed the amount per the relatedagreements to the cash receipts records.8. We selected dasher board signs, inquired as to who advertised in the space during theseason, and agreed the amount per the related agreements to the cash receipts records.9. We agreed the amount recorded in the URO as <strong>NHL</strong> broadcasting revenue to the <strong>NHL</strong>allocation schedule.10. We agreed the annual revenue from local cable and radio rights per the URO to the relatedagreements.


Appendix H (cont’d)11. We obtained an explanation from management of the (insert club name) of procedures torecord concession revenue on hockey nights. For hockey games, we agreed amountsrecorded as concession revenue to either cash receipts records or third-party reports.12. We obtained an explanation from management of the (insert club name) of procedures torecord novelty revenue on hockey nights. For hockey games, we agreed amountsrecorded as novelty revenue to either cash receipts records or third-party reports. Fornovelty items, we calculated the margin by <strong>com</strong>paring the selling price per sales records andcost per vendor invoice. We <strong>com</strong>pared these margins to the margin for novelty revenue in theURO.13. We agreed the total on the player salary schedule in the URO to the total of player costs in theURO. For players, we <strong>com</strong>pared the salary per the schedule to the player’s contract.14. We <strong>com</strong>pared the arena operating costs for the year ended June 30, 2003 to the arenaoperating costs in the prior year that was audited.15. We <strong>com</strong>pared the general and administrative costs for the year ended June 30, 2003 to thegeneral and administrative costs in the prior year that was audited.16. We obtained a representation letter from management addressing accuracy and <strong>com</strong>pletenessof the URO, <strong>com</strong>pliance with URO instructions, appropriateness of allocations and disclosureof related party transactions.We were not engaged to, and did not, perform an audit, the objective of which would be theexpression of an opinion on the URO. Accordingly, we do not express such an opinion. Had weperformed additional procedures, other matters might have <strong>com</strong>e to our attention that would havebeen reported to you.This report is intended solely for the information and use of the team and the <strong>NHL</strong> and theirrepresentatives, and is not intended to be and should not be used by anyone other than thosespecified parties.Very truly yours,Date


Appendix I<strong>NHL</strong> Summary Statement of OperationsCombined League-wide URO2002-2003 Season(Millions of US Dollars)Regular Season Playoffs TotalRevenues 1Gate Receipts $886 $111 $997Pre-Season & Special Games 50 - 50Broadcasting and New Media Revenues 432 17 449In Arena Revenues 401 14 415Other Hockey Revenues 82 3 85Total Revenues 1,851 145 1,996Player CostsSalaries and Bonuses 1,415 14 1,429Benefits 2 64 1 65Total Player Costs 1,479 15 1,494Other Operating CostsOther Player Costs 28 - 28Team Operating Costs 259 23 282Team Development Costs 69 2 71Arena & Building Costs 138 7 145General & Administration 116 1 117Adv., Mkt., PR. & Tickets 126 6 132Total Operating Costs 736 39 775Total Costs 2,215 54 2,269Operating Loss (excluding depreciation,amortization, interest and taxes)($364) $91 ($273)1) Revenues are net of all reasonable and customary direct costs.2) Includes CBA payments made to the <strong>NHL</strong>PA for games 83/84 and training camp allowances paid to players.


Arthur <strong>Levitt</strong>Appendix JArthur <strong>Levitt</strong> was the 25th Chairman of the United States Securities and Exchange Commission. Firstappointed by President Clinton in July 1993, the President reappointed Chairman <strong>Levitt</strong> to a secondfive-year term in May 1998. On September 9, 1999, he became the longest serving Chairman of theCommission. He left the Commission on February 9, 2001.Investor protection was Chairman <strong>Levitt</strong>'s top priority. Throughout his tenure at the Commission,Chairman <strong>Levitt</strong> has worked to educate, empower, and protect America's investors – now more than50 million strong. Early in his tenure, Chairman <strong>Levitt</strong> created the Office of Investor Education andAssistance and established a website (www.sec.gov), which allows the public free and easy access tocorporate filings and investor education materials. In the past seven years Chairman <strong>Levitt</strong> hasconducted more than forty investor town meetings throughout the country to listen to the concerns ofinvestors and to give them tips on safe and wise participation in the securities markets.Other hallmarks of Chairman <strong>Levitt</strong>'s tenure include, improving the quality of the financial reportingprocess, maintaining the independence of auditors, saving investors billions of dollars by reducingspreads in the Nasdaq market, promoting the use of plain English, requiring that importantinformation be released to all investors simultaneously, fighting Internet fraud, and cleaning up themunicipal bond market.Key policy successes include:• strengthening the independence of auditors and the profession's self-regulatory functions;• improving the quality of financial reporting, including strengthening the oversight role ofcorporate audit <strong>com</strong>mittees;• leveling the information playing field through Regulation Fair Disclosure, which requires<strong>com</strong>panies to release important information to all investors at the same time;• creating a regulatory framework that embraces new technology and promotes <strong>com</strong>petitionthrough the order handling rules, which dramatically reduced the cost of buying and selling inthe Nasdaq market, and Regulation ATS, which provided regulatory flexibility for electronicmarkets to innovate;• reforming the municipal debt markets by eliminating pay-to-play and improving pricetransparency;• requiring the use of plain English in mutual fund investment literature, public <strong>com</strong>pany<strong>com</strong>munications with investors, and SEC <strong>com</strong>munications with the public;• sanctioning the Nasdaq market for price manipulation and mandated improved selfgovernance;• preserving the independence of the private sector standard setting process;• <strong>com</strong>mencing vigorous Internet fraud detection and prosecution;• working closely with the criminal authorities to prosecute securities fraud; and• improving broker sales and pay practices.Before joining the Commission, Mr. <strong>Levitt</strong> owned Roll Call, a newspaper that covers Capitol Hill.From 1989 to 1993, he served as the Chairman of the New York City Economic DevelopmentCorporation, and from 1978 to 1989 he was the Chairman of the American Stock Exchange. Prior tojoining the Amex, Mr. <strong>Levitt</strong> worked for 16 years on Wall Street He is presently Senior Advisor toThe Carlyle Group and on the boards of Neuberger Berman and Bloomberg as well as a member ofthe American Academy of Arts & Sciences. He graduated Phi Beta Kappa from Williams College in1952 before serving for two years in the Air Force.<strong>Levitt</strong>’s bestselling book, TAKE ON THE STREET: What Wall Street and Corporate America Don’tWant You to Know/What You Can Do to Fight Back was published by Pantheon Books in October,2002. -


Lynn E. TurnerAppendix KMr. Turner has the unique perspective of having been the Chief Accountant of the Securities and ExchangeCommission, a professor of accounting, a corporate board member, a partner in one of the majorinternational accounting firms, and a chief financial officer and executive in industry.Mr. Turner served as the Chief Accountant of the Securities and Exchange Commission (SEC) from hisappointment by the SEC Chairman in July 1998 to August 2001. As Chief Accountant, Mr. Turner was theprincipal advisor to the SEC Chairman and Commission on financial reporting and disclosure by public<strong>com</strong>panies in the U.S. capital markets as well as the related corporate governance matters. These issuesincluded the oversight and development of U.S. accounting, disclosure and auditing standards, thedevelopment and coordination of international accounting standards, as well as matters affecting audit<strong>com</strong>mittees of public <strong>com</strong>panies. In this capacity Mr. Turner worked regularly with Congress, variousfederal and state government agencies, international regulators, representatives of industry, and theaccounting profession.Lynn Turner joined the faculty of Colorado State University in August 2001 where he is the Director ofThe Center for Quality Financial <strong>Report</strong>ing in the College of Business.From June of 1996 to June of 1998, Mr. Turner was the Chief Financial Officer and Vice President ofSymbios, Inc an international semiconductor and storage manufacturer. Mr. Turner was responsible for the<strong>com</strong>pany’s financial and management reporting, risk management and budgeting processes. He alsoworked closely with the Chief Executive Officer and the Board of Directors in the development andimplementation of the <strong>com</strong>pany’s business strategy.Before joining Symbios, Mr. Turner was a partner with Coopers & Lybrand, (nowPricewaterhouseCoopers). Mr. Turner served as one of the firm’s national SEC review partners. He was theNational Practice Leader responsible for the national C&L High Technology Audit Practice. Mr. Turnerjoined C&L in July 1976 and remained with the firm until 1996 with the exception of a two-yearappointment to a Fellowship with the SEC from 1989 to 1991.Mr. Turner has served as an expert witness for and testified before Congress on several occasions. He hasappeared on National Public Radio and all the major television networks including NBC, ABC, CBS, CNN,CNBC, CNNfn, Bloomberg TV and MSNBC. Mr. Turner has also served as one of six members of thePanel of Experts for the International Monetary Fund (IMF). This panel of international experts wasresponsible for making re<strong>com</strong>mendations to the IMF with respect to improving controls over itsinternational lending practices.Mr. Turner is a member of the Board of Directors of Sun Microsystems. He serves as a senior advisor toKroll Zolfo Copper and director of research at GlassLewis LLC. Kroll Zolfo Cooper specializes inCorporate Advisory and Restructuring and Forensic and Litigation Consulting and GlassLewis is anindependent research firm providing investors proxy, corporate governance and financial researchMr. Turner has received honorary doctorates in Business Administration from Central Michigan Universityand Grand Valley State University. He has also twice been a recipient of the SEC Chairman’s Award forExcellence. He has been the Colorado State University College of Business Alumni of the Year, and hasreceived from Beta Alpha Psi, the National Accounting Honorary Society, the national award for BusinessInformation (Accountant) Professional of the Year.Mr. Turner is a member of the Colorado Society of Certified Public Accountants (CSCPA), the AmericanInstitute of Certified Public Accountants, and the Financial Executives Institute. Mr. Turner holds an MAin Accounting from the University of Nebraska and a BA in Business Administration, with a concentrationin Accounting, from Colorado State University.

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